Malaysia to revise its budget again as oil drops to unprecedented level

Thomson ReutersMalaysia’s Prime Minister Najib Razak inspects the United Malays National Organisation (UMNO) youth during the annual assembly in Kuala LumpurKUALA LUMPUR (Reuters) – Malaysian Prime Minister Najib Razak will table amendments to the 2016 budget “soon” that will take into account the challenges expected in the new year, state news agency Bernama quoted him as saying on Friday.

Mr Najib did not specify when the meeting would be tabled.

“On Thursday, the price was US$31 per barrel”, he said.

In October previous year, Najib announced Malaysia’s 2016 budget with an allocation of RM267.2 billion. “We have to be ready to think of the best method to ensure our economy is sustainable”.

Malaysia was an oil revenue-reliant country, where dividends from Petronas account for up to 40 percent of the government’s revenue.

To make up for the slump in revenue from the oil and gas sector, the government launched the so-called consumption-based goods and services tax in April previous year and market-linked retail prices of gasoline and diesel, which helped it to cut back on costly subsidies.

“Inflation is expected to remain low, projected to be in the range of two to three per cent”, he said.

He said this year would be more challenging with the economic slowdown in China, Malaysia’s largest trading partner, and further slides in global demand. The brokerage estimates that every $5 shortfall in oil price from the budgeted estimate will widen the fiscal deficit by about 0.1% of GDP. The Prime Minister has denied any wrongdoing.

He the UTCs contributed greatly to the implementation of “People Economy’ programmes which benefited Malaysians a lot”.

“The facilities enjoyed by public servants, such as total loan entitlement and interest rate on housing loans, which is four per cent, as well as other facilities are retained”, he said.