Debt-laden Malaysia surprises with big-spending budget

Tuesday, 6 November 2018 00:00 - - {{hitsCtrl.values.hits}}

This handout photo taken and released by the Malaysia's Department of Information on Friday shows Malaysia's Prime Minister Mahathir Mohamad (C) together with Finance Minister Lim Guan Eng (L) and Deputy Prime Minister Wan Azizah Wan Ismail (R) arriving for the 2019 budget presentation at the Parliament House in Kuala Lumpur. — AFP

KUALA LUMPUR, AFP: Malaysia’s new government unveiled the country’s biggest ever budget Friday, a surprise move that defied expectations of major belt-tightening to reduce national debts inherited from the corrupt former administration.

Analysts had expected a raft of higher taxes and deep cuts to spending after warnings from the new administration about the dire state of the public finances after years of mismanagement by the last government.

But the 2019 budget, totalling 314.5 billion ringgit ($75.55 billion), was the biggest on record.

Finance minister Lim Guan Eng said the Pact of Hope alliance, which took power after a surprise win in May polls which toppled a long-ruling coalition, was aiming to improve the “well-being of the people”.

The government wanted to ensure that people “are better off economically in the form of higher wages, better jobs and more money to spend,” he said.

The figure was higher than the 290.4 billion ringgit 2018 budget presented by then prime minister Najib Razak, which was filled with cash handouts and tax cuts aimed at winning over voters ahead of May’s election. To meet the increased government expenditure, the administration will receive a one-off special dividend from state energy giant Petronas next year.

There were some new taxes on gambling and the property sector, but they were far more mild than many had expected.

The budget could alarm investors who are watching carefully to see what the government will do to reduce a national debt they say is around $250 billion.

Najib and his Barisan Nasional coalition were ousted by veteran politician Mahathir Mohamad, who rode to victory on a wave of public anger over corruption and rising living costs.

Najib and a number of his allies have since been arrested and slapped with corruption charges linked to allegations they looted state fund 1MDB. The former leader denies any wrongdoing.

Mahathir’s government has already taken some measures aimed at reducing the national debt.

These include cancelling China-backed mega-projects that were widely viewed as dubious deals struck by Najib as he sought money to pay off debts.