Towards transparency in government spending

PETALING JAYA: Competency, accountability and transparency – these are the key governing principles outlined by the Pakatan Harapan government to ensure good practices in the management of public expenditure.

In its inaugural publication of the Fiscal Outlook and Federal Government Revenue Estimates report, the government notes that transparency in reporting expenditure has been heightened, particularly in recognising and disclosing off-budget spending.

Among the earliest measures taken by the govenment to manage its expenditure was the review of the public infrastructure spending policy, particularly to address the simultaneous implementation of several mega-projects.

As widely reported, the implementation of several projects were deferred, with its scope and viability reviewed and the value of contracts renegotiated.

Several other programmes and projects were reprioritised based on needs and urgency, apart from introducing zero-based budgeting for the 2019 budget.

Ministries and agencies were also rationalised to streamline their roles and functions, while procedures of procurement have been improved by enhancing related legal framework in order to curb wastage and leakages.

“The federal government continues to spend on strengthening and stimulating the growth of the economy; and enhancing the standards of living of the rakyat.

“Competency, accountability and transparency are the key governing principles to ensure transparent and good practices in the current public expenditure management,” it said in the report.

A zero-based budgeting approach has been used in formulating Budget 2019, as noted by the Finance Minister in his speech last Friday.

Expenditure items were reviewed based on requirements and capacity, instead of simply maintaining the allocations given in the previous years, to improve spending efficiency without affecting public service delivery.

In addition, it noted that the allocation on transfers to statutory bodies and GLCs with high cash reserves were also reviewed.

This, it said, was in tandem with the effort to further strengthen the country’s fiscal position, as well as ensuring the prudent spending and efficient use of public resources.

A total of RM314.6bil has been budgeted for the federal government’s expenditure in 2019. Of this, RM259.9bil or 82.6% is for operating expenditure (OE), while the balance of RM54.7bil will be for development expenditure (DE).

As a percentage of gross domestic product or GDP, the budgeted amount is 0.3 percentage points higher than the 2018 revised estimates.

Looking at the budgeted amount in terms of sector, after excluding charged and transfer expenditure (36.1%), the social sector will be allocated 34%, followed by economic (14.2%), general administration (6%) and the security sector (9.7%).

Of the OE allocation of RM259.9bil, the largest amount will be spent on emoluments (31.6%) followed by debt service charges (12.7%), supplies and services (11.2%) and retirement charges (10.2%).

Looking at the allocation for ministries, the top-three ministries with the highest allocations, which constitute 40.3% of total OE, are the Education Ministry, Health Ministry and Finance Ministry, with RM55.1bil, RM26.5bil and RM23bil, respectively.

By sector, after excluding charged expenditures and transfer payments (43.5%), the social sector receives the highest allocation (35.3%) followed by security (9.1%), general administration (6.1%) and economic (6%) sectors.

Another major component of the OE, supplies and services, is expected to reduce to RM29.1bil following the government’s efforts to reprioritise projects and programmes.

Subsidies and social assistance, which comprise subsidies for goods and services, incentives and social assistance, are projected to decrease to RM22.3bil on the back of the reintroduction of the managed-float system for RON95 petrol and diesel retail prices, as well as the restructuring of the Living Aid Assistance, formerly known as the 1Malaysia People’s Aid.

The RM54.7bil allocated for DE, on the other hand, represents a marginal decrease of 0.4% from 2018.

“In ensuring a more prudent government financial management, infrastructure projects with high multiplier impact on the economy and programmes that are people-centric are given priority,” it says.

The economic sector remains the largest recipient, with an allocation of RM29.2bil, and constituting 53.4% of total DE.

The sector will focus on the transportation system, trade and industry, energy and public utilities, as well as agriculture and rural development, in tandem with the initiative to enhance competitiveness and raise the value chain of the economy.