Malaysia PM delivers budget amid opposition protests
Najib aims to keep budget deficit to 3% of GDP
KUALA LUMPUR: Malaysia’s Prime Minister Najib Razak courted voters with perks and subsidies yesterday but was greeted by angry protests from opposition leaders unhappy with his handling of a corruption scandal at state fund 1Malaysia Development Berhad (1MDB). Najib, eyeing possible early elections next year, also pledged in his budget to cut a large fiscal deficit to keep the economy on track for strong growth.
Southeast Asia’s second-largest oil producer was left reeling from the slump in global crude prices late last year, forcing it to slash its 2016 budget in January and lower its growth target to between 4 and 4.5 percent. Najib said the outlook was improving and expects growth to pick up marginally in 2017 to between 4 and 5 percent.
Spending will rise 3.4 percent to 260.8 billion ringgit ($62.3 billion) next year, but the budget deficit would be cut to 3 percent of GDP from a target of 3.1 percent this year, he said. Ratings agencies have warned of a possible downgrade if the budget deficit is too large. “We are now on the right track, as we have and are taking firm, bold and right decisions despite the measures being unpopular,” the prime minister said in his speech in parliament.
Malaysia’s stock market and ringgit currency were unmoved. Najib was widely expected to present a populist budget toshore up support ahead of elections he could call in 2017.
He announced an allocation of 6.8 billion ringgit to the government’s annual cash handouts program, with 10 billion ringgit to be set aside for subsidies next year. The government’s housing program for first time homebuyers would be expanded, while a special fund of up to 3 billion ringgit would be allocated for investment in small- and mid-cap companies.
Najib also announced tax relief on consumer items and relief for working mothers and parents of pre-schoolers. “In our view, it remains a fine balancing act to maintain fiscal prudence and growth, with oil as the wild card,” said Weiwen Ng, an analyst at ANZ Research.
OPPOSITION WALKOUT
Najib has been under fire over allegations of corruption at 1MDB, the indebted state fund whose advisory board he chairs. Lawsuits filed by the US Justice Department in July seek to seize more than $1 billion of assets allegedly siphoned off from 1MDB, a fund Najib established in 2009.
The lawsuits do not name Najib but say more than $700 million of misappropriated funds flowed into the accounts of “Malaysian Official 1”, who US and Malaysian officials have identified as Najib. The prime minister was booed by opposition lawmakers throughout his speech. The speaker then asked lawmakers not interested in listening to the budget to leave. About 80 percent of the opposition bench walked out, describing the budget as unrealistic, said opposition lawmaker Tian Chua. — Reuters