The 2023 Budget allocated a total of RM372.3 bilion, a significant increase from the RM332 billion allocated for Budget 2022 and RM322 billion for Budget 2021.
Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said of the total, the budget themed “Keluarga Malaysia, Prospering Together”, allocated RM272.3 billion for operating expenditure and RM95 billion for development expenditure for 2023.
Additionally, the remaining RM5 billion is for outstanding payments of the Covid-19 Fund commitments made in 2022 as stipulated in Section 8(1), Temporary Measures for Government Financing (Coronavirus Disease (Covid-19)) Act 2020.
“In terms of sectoral allocation, 37.2 percent (of Budget 2023) is allocated for programmes and projects under the social sector, followed by the economic (19.5 percent), security (9.9 percent) and general administration (5.5 percent) sectors, and 27.9 per cent is allocated for charged expenditures and transfer payments.
“The top three recipients of Budget 2023 are the Ministry of Finance (RM67.2 billion), Ministry of Education (RM55.6 billion) and Ministry of Health (RM36.1 billion), constituting 43.3 percent of total expenditure,” it said in its 2023 Fiscal Outlook and Federal Government Revenue Estimates report.
Emoluments for civil servants remain as the largest component, constituting 33.3 percent of the opex, the ministry said. “The component is estimated to increase by 4.9 percent to RM90.8 billion, mainly due to provision of special annual salary increment for civil servants as well as absorption of contract officers to permanent positions, particularly in the health and education services,” it said.
This is the second budget tabled under the government led by Prime Minister Datuk Seri Ismail Sabri Yaakob and also the second since the 12th Malaysia Plan (12MP) was launched on 27 Sept last year.
Tengku Zafrul said the budget is driven by the 3R agenda, namely Responsive, Responsible and Reformist.
“The budget is highly responsive to any challenge, which will be done through the comprehensive assistance made available to Keluarga Malaysia (Malaysian Family), not only the B40 group, but also the M40 group, women, youth, persons with disabilities (OKU) and all segments of society,” he said.
For the SMEs in 2023, he said: “Government’s procurements play an important role as an economic multiplier. For 2023, the government will provide RM3.7 billion to implement small and medium projects nationwide.”
Among others, a special scheme to promote the participation of women as contractors will be implemented while RM20 million will be allocated for an express claim scheme for small contractors, he said.
Tengku Zafrul said the budget is responsible for balancing the expanding fiscal policy by implementing fiscal reforms towards the government’s financial sustainability in the long run, noting that Budget 2023 will continue to provide substantial support to the economy with a total allocation of RM372.3 billion or 20.5 percent of the gross domestic product (GDP).
Ageing population
Meanwhile, retirement charges are estimated to increase by 1.4 percent to RM29.1 billion representing 10.7 percent of the total opex.
A total of RM21.9 billion or 75.3 percent of retirement charges comprise pension payments for about 958,700 pensioners and beneficiaries, while the remaining are mainly for gratuity payments and cash award in lieu of accumulated leave.
“As Malaysia is now an ageing nation based on the definition by the United Nations (UN), pension liabilities are expected to expand further. Therefore, the government is exploring options to efficiently manage future pension obligations.
“As stipulated in the Federal Constitution, the DSC is a charged item that must be prioritised before all other opex, and it is estimated to grow by 7 percent to RM46.1 billion in tandem with higher financing needs for DE and Covid-19 Fund,” it said.
Of the amount, 98.4 percent is allocated for the payment of coupons on domestic debts, particularly Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII), while the balance is for offshore loans.
The DSC ratio-to-revenue is estimated at 16.9 percent, compared to the 15 percent threshold in accordance with international best practices.
The finance minister said in ensuring that Budget 2023 will be responsive, the government will continue to implement an expansionary fiscal policy so that it will deliver the necessary support to the people and businesses.
Tengku Zafrul noted that the economy expanded 5 percent in the first quarter and jumped 8.9 percent in the second, which was the best performance in Southeast Asia.
“The economic momentum is expected to continue with a solid third quarter growth. Hence from a previous forecast of 5.3 – 6.3 percent, the government has revised upward the GDP growth for 2022 to between 6.5 and 7 percent,” he said.
For 2023, Malaysia is expected to see economic expansion moderating to between 4 and 5 percent.
Although the allocation for Budget 2023 has been expanded with an expansionary fiscal policy, Tengku Zafrul said as a responsible government, it will be balanced with a commitment to implement fiscal consolidation to ensure financial sustainability.
With an expected revenue of RM272.6 bililon, the 2023 fiscal deficit is projected to be reduced to 5.5 percent of GDP compared with 5.8 percent in 2022.
“Based on the medium term fiscal framework, the deficit level from 2023 to 2025 is projected to reduce to an average of 4.4 per cent of GDP. The government will continue to strive to improve its financial position in the medium term to achieve a deficit target of 3.5 per cent of GDP as targeted for in the 12th Malaysia Plan.”
