Fiscal support in difficult times

Total govt expenditure 2021

THE resurgence of Covid-19 cases had forced the government to reimpose movement control orders (MCOs) that impacted almost all economic sectors and limited social activities.

A series of assistance and economic stimulus packages were swiftly introduced to provide immediate assistance to the rakyat and businesses.

These packages adopted a targeted approach in ensuring impactful measures in effectively softening the impact of the pandemic.

The additional fiscal support was mainly for strengthening the public health system and providing cash assistance to households and businesses.

This has resulted in higher spending, particularly for commitments under the Covid-19 Fund. The additional spending was offset by a rigorous expenditure recalibration.

In addition, the government continues to manage its fiscal resources by enhancing spending efficiency, reducing leakages and optimising operating expenditure in the new norm.

These initiatives are complemented by close monitoring and regular reporting on a weekly basis, in line with principles of accountability and transparency.

The Federal Government’s total expenditure for 2021 was budgeted at RM322.5bil.

However, during the year, a series of four assistance and economic stimulus packages, namely Perlindungan Ekonomi dan Rakyat Malaysia (Permai), Strategic Programme to Empower the People and Economy (Pemerkasa), Strategic Programme to Empower the People and Economy Plus (Pemerkasa+) and National People’s Wellbeing and Economic Recovery Package (Pemulih), totalling RM225bil, were announced with a fiscal injection of RM25bil.

In general, the packages were in the form of cash assistance for the rakyat and businesses, particularly for those affected by the extended MCOs due to the pandemic.

Furthermore, the additional stimulus and containment measures have put pressure on revenue which is projected to be lower than budget estimates.

The situation necessitated an expenditure recalibration, particularly operating expenditure, which has to be fully funded by revenue in line with the Federal Constitution.

Hence, the Federal Government’s total expenditure for 2021 was revised downwards to RM320.6bil, albeit higher than total spending in the previous year (2020: RM314bil).

The recalibration involved a net reduction of RM1.9bil in expenditure, resulting from expenditure savings amounting to RM23.9bil, of which RM22bil was redirected to finance additional direct fiscal injection under the Covid-19 Fund.

Savings in expenditure were generated from the deferment of certain programmes and projects, suspension of non-critical programmes, revision of allocations for budget measures, as well as expected shortfall in spending due to the delayed progress in the implementation of projects during the MCOs.

Of the total revised allocation, operating expenditure is estimated at RM219.6bil, development expenditure at RM62bil, while the balance of RM39bil is for the Covid-19 Fund.
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