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KUALA LUMPUR – The federal government’s total expenditure in 2023 is estimated to have declined by 2.3% to RM386.1 billion, mainly due to the completion of the Covid-19 fund as of December 31, 2022.
The Finance Ministry (MoF), in its Fiscal Outlook and Revenue Estimates 2023 report, said of this amount, 74.9% will be allocated for operating expenditure (OE) while 25.1% will be for development expenditure (DE).
“In terms of sectoral allocation, 35.2% of the total expenditure is allocated for the social sector, followed by economic (19.1%), security (9.7%) and general administration (5.1%) sectors.
“Meanwhile, the balance of 30.9% is allocated for charged expenditures and transfer payment,” it said.
According to the report, the allocation for OE is estimated to be slightly lower by 1.2% at RM289.1 billion or 15.3% of gross domestic product (GDP).
It said this is primarily due to lower subsidy allocations as commodity prices are anticipated to moderate and from a gradual implementation of targeted subsidy mechanisms.
Nevertheless, allocations for emoluments, retirement charges, debt service charges (DSC) and grants to statutory bodies are expected to remain high, it said.
“Emoluments are estimated to increase by 3.4% to RM90.8 billion and remain the largest component of OE at 31.4%.
“The higher outlays for emoluments is due to the special annual salary increment of RM100 on top of annual increments as well as absorption of contract officers to permanent positions, particularly in the health and education sectors,” said the MoF.
The ministry said retirement charges are projected to remain stable at RM31.1 billion representing 10.7% of total OE.
“Of this, pension payments make up RM23.9 billion or 76.9% while the balance is for gratuity payments and cash award in lieu of accumulated leave,” it said.
Subsidies, social assistance to decrease
Meanwhile, MoF said DSC is estimated to grow by 11.7% to RM46.1 billion or 2.4% of GDP as a result of higher accumulated borrowings, particularly during the pandemic.
“Additionally, supplies and services, constituting 11.1% of OE, are expected to decline by 7.7% to RM32 billion – the reduction stems mainly from lower professional services allocation.
“As a ratio-to-GDP, supplies and services allocation is estimated at 1.7%,” it said.
The MoF said subsidies and social assistance are projected to decrease by 12.9% to RM58.6 billion following the expectation of lower global crude oil prices and in line with the gradual shift towards a more targeted subsidy mechanism.
“Meanwhile, the government will continue to provide cash assistance aimed at easing the financial burden of the lower income group,” it added.
According to the report, the allocation for grants to statutory bodies is expected to increase by 7.9% to RM15.1 billion, of which the bulk of the allocation is for operational expenses of 20 public universities and nine teaching hospitals.
Meanwhile, RM8.1 billion has been allocated as grants and transfers to state governments, of which RM6.1 billion is constitutional grants as mandated under the federal constitution, said the ministry.
Government to fulfil financial obligations
The MoF said a total of RM97 billion was allocated for DE to implement quality development projects which emphasised high-impact investments to further boost economic growth.
The government is also committed to fulfilling financial obligations, including the redemption of a US$3 billion 1MDB bond, maturing in March 2023 and other private partnership (PPP)/private financing initiative (PFI)-related financial commitments.
In terms of sectoral allocation, the economic sector remains the largest recipient at 56.7% or RM55 billion, with the transport subsector accounting for 18.1% or RM17.6 billion mainly for the construction of roads and highways as well as upgrading of existing roads, airports and ports.
“Energy and public utilities sub-sector will receive RM3.2 billion to upgrade rural public amenities as well as provision of clean water and affordable clean energy.
“RM3.3 billion will be allocated for the agriculture subsector to address rising concerns on the nation’s food security,” according to the report.
In the meantime, social services are the second largest sector to receive RM26.5 billion or 27.4% of total DE and half of the allocation will be earmarked for education and training sub-sectors.
“Health subsector will receive RM4.9 billion to build, upgrade and repair health facilities, while the housing subsector will be allocated RM2.1 billion to provide affordable housing,” said the MoF.
It said RM11.5 billion would be channelled to the security sector, of which RM6.4 billion will be allocated to defence subsectors while the remaining is for internal security.
“In addition, a sum of RM3.9 billion will be allocated to the general administration sector mainly for enhancing information and communications technology systems along with refurbishing, upgrading and fittings of government buildings and facilities,” it added.
The budget for 2023 was originally tabled by the previous government but could not be passed before Parliament was dissolved. – Bernama, February 2024, 2023