Najib to table 2016 Budget today

KUALA LUMPUR, Malaysia–Prime Minister Najib Razak on Friday unveiled a national budget offering cash handouts and tax relief to Malaysians struggling in a slowing economy battered by falling commodity prices and uncertainty fed by a scandal embroiling a state investment fund.

The country’s economy is expected to grow between 4.5 and 5.5% this year but the pace could slow to between 4 and 5% in 2016, said Najib, who is also finance minister, as he presented the budget proposal to the lower house of parliament.

The proposed budget must be approved by Parliament. “We need to achieve an inclusive and sustainable growth as well as build a competitive, progressive and a morally strong nation, with a society that is united”, he said in a speech to lawmakers.

He claimed that the Budget reflected the government’s caring policy, as shown by the increase in minimum wage to RM1,000 in the Peninsula and RM900 in Borneo, and changes in the civil service salary structure, besides exemption of goods and services tax for instant milk and more medicines.

Altogether, the entire project will reportedly span a total distance of 2,239 km have a ceiling budget of around RM27 billion, although the federal government is still working to finalise the cost and design of the highway. Opposition lawmaker Tony Pua said it failed to deal with the 1MDB debts, which have ballooned to more than 42 billion ringgit ($10 billion) in six years, and that the $700 million in Najib’s accounts had hurt confidence in his leadership.

The report said that with help of revenues from a consumption tax introduced in April, the fiscal deficit would be reduced from 3.4 percent of gross domestic product a year ago, to 3.2 percent in 2015 and 3.1 percent in 2016.

Wan Azizah Ismail, the wife of jailed opposition figure Anwar Ibrahim and leader of Malaysia’s opposition coalition, filed the vote of no-confidence, saying it was aimed squarely at Mr Najib and not the government.

Malaysia, a major Southeast Asian producer of oil and gas, has been hit hard by the collapse in global crude prices since mid-2014.

The 2016 budget allocation was put at RM267.2 billion, RM6.5 billion more than in 2015.

That’s why analysts expect the government to look for operating expenditure cuts – such as cutting remaining fuel subsidies – even as it tries to keep up development spending and target lower-income households, often called the B40, or bottom 40 percent with incomes of less than around 2,500 ringgit a month. The stock market ended 0.34 per cent higher before Najib finished his speech. Its current account surplus would be more than halved to RM$11.3 billion in 2016, extending a negative trend that has been a key factor behind the ringgit’s 17-per-cent fall this year.

In response to the budget, Khazanah Nasional Berhad said in a statement: “Given challenging external and domestic conditions, a tough balancing act was addressed through proactive budgetary and redistribution measures”.