Malaysia: 2021 Budget Includes Substantial Spending on COVID-19

Hadi Azmi, Muzliza Mustafa and Nani Yusof
Kuala Lumpur and Washington
2020-11-06
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201106-MY-Budget1000.jpg Malaysian Finance Minister Tengku Zafrul Aziz addresses Parliament as he introduces the proposed 2021 budget in Kuala Lumpur, Nov. 6, 2020.
Courtesy of Malaysia Information Department

Malaysia’s government unveiled a record 322.5 billion ringgit (U.S. $78.1 billion) budget Friday that aims to boost the nation’s economic recovery amid a resurgent COVID-19 pandemic, and whose passage is seen as crucial for Prime Minister Muhyiddin Yassin’s political survival.

Muhyiddin said the proposed budget, which represents a 2.5 percent increase from the 314.7 billion ringgit ($76.2 billion) 2020 spending plan, is evidence of his government’s commitment to Malaysia.

“The government will not compromise in matters regarding the welfare of the people. This is clear by the highest ever allocation for the people in the 2021 budget compared to the previous national budget tabled previously,” Muhyiddin said.

His unelected government, which came to power eight months ago, is clinging to a razor-thin parliamentary majority. Failure for his government to pass its first piece of legislation – in this case, the national spending plan for next year – would amount to a no-confidence vote in the prime minister, analysts have warned. Lawmakers will begin debates on the budget next week.

On Friday, Finance Minister Tengku Zafrul Aziz struck an upbeat tone in a speech to Parliament as he introduced the budget.

He said he expected the economy to expand by 6.5 percent to 7.5 percent, because of the government’s economic stimulus efforts that are in the budget.

In June, the Manila-based Asian Development Bank projected that ripple effects from the coronavirus pandemic would cause the Malaysian gross domestic product to contract by 4 percent.

“One irrefutable fact that is worth reminding is, irrespective of the challenges, we have proved to the world that Malaysia can steer our own economy – whether in stormy seas or calm waters,” he said, according to the text of his speech.

“Let us turn our experience in facing past economic crises into an anchor that keeps us committed, so that we remain steadfast in our endeavors, reasoned in our actions, and surefooted in mustering our collective efforts,” he added.

The budget earmarks 17 billion ringgit ($4.1 billion) to cope with the COVID-19 pandemic in the coming year, according to Aziz.

“The effects of the COVID-19 epidemic will continue to be felt next year,” he said, noting that government efforts to raise revenues have been hurt by the pandemic.

“As a result, the government’s revenue this year has been revised to 227.3 billion ringgit ($55 billion), reduced by almost 18 billion ringgit ($4.3 billion) from the original projection of 244.5 billion ringgit ($59.2 billion),” he said.

Government documents showed that the difference in spending and revenues would be covered through “borrowings and use of government’s assets.”

The budget, which requires a simple majority to pass in Malaysia’s 222-seat parliament, faces a challenge from an opposition pact along with lawmakers who questioned Muhyiddin’s leadership in the weeks leading up to Friday’s tabling. It must be passed before the session ends on Dec. 23.

The finance minister unveiled the spending plan on the day Malaysian health officials announced a single-day record of 1,755 new coronavirus cases since the viral outbreak began in the country in February. A new wave of COVID-19 infections has surged since late September and have been mostly concentrated in the Malaysian Borneo state of Sabah. As of Friday, the country had detected nearly 38,200 cases and 279 deaths from the virus.

Opposition concerns

On Friday, opposition leader Anwar Ibrahim expressed concern about the budget.

“When income projections are changed and raised to show the deficit is reduced in calculating the national budget – that for me is very worrying,” he said in a video posted on his Facebook page. “There should be a more-transparent attitude of stating the facts because it will be studied and will affect our policy.”

He questioned plans to turn around the economy.

“The most significant weakness in this budget, there is not a single leap in how we can revive the economy,” he said.

“[T]his budget does not give an idea of ​​how we can stimulate and advance economic development so that it can live and freshen up,” he said, adding that temporary payments to dismissed workers would help but is not the answer to repairing the economy.

In September, Anwar mounted a challenge to Muhyiddin’s power by claiming he had majority support among MPs in order to form a new government, but the opposition leader declined to release a list of names of lawmakers who back him.

During a meeting with the finance minister last weekend, Anwar and other opposition lawmakers linked to the Pakatan Harapan coalition, presented six proposals which, they argued, were instrumental for gaining their support on budget.

Those proposals include increasing health ministry resources, education spending and monthly aid to citizens during the pandemic, along with extending a loan moratorium and wage subsidy until the end of March 2021; allowing expenditures on developing the nation’s fiber network infrastructure; and upgrading water infrastructure for Selangor, Kelantan and Pahang.

“If any of the key six measures proposed by Harapan are rejected, then there will be no unity budget that can work to benefit the nation, our national economy and the rakyat [the people],” former Finance Minister Lim Guan Eng said Monday.

Moves by UMNO

Meanwhile, Muhyiddin’s biggest ally, the United Malays National Organization, has pledged that it will support the budget. At the same time, the party’s leader reported that UMNO wanted a snap election once COVID-19 is under control.

Muhyiddin assumed power in March, succeeding Mahathir Mohammad as prime minister after the Pakatan Harapan government collapsed over infighting in late February.

“The fact that UMNO is proposing for a general election at the earliest possible time – after the pandemic situation is under control – is an indication that it is still unhappy with Muhyiddin,” Tunku Mohar Mokhtar of the International Islamic University of Malaysia told BenarNews in October.

“What UMNO succeeded in doing is to tell Muhyiddin that he doesn’t have a blank check to do as he pleases because UMNO’s support is conditional.”

On Friday, Mokhtar said the budget did not directly address the demands made by Pakatan.

“One of the populist demands by the opposition was to reintroduce a moratorium on loan payment for another six months. This was not fully accepted by the government, but the budget provides for a targeted approach only for those who are having difficulties in repaying the loans,” Mokhtar said.

“It is obviously a ‘crisis’ budget, where despite the decline in government revenues, it has to focus on spending to stimulate the economy and provide assistance to sectors that are badly affected by the pandemic,” he said.

Mokhtar said Muhyiddin seemed confident that he would have support for the budget.

“For that, incorporating the opposition’s demands is not his priority. In reaching to the Malay-Muslim interests, he is also appeasing UMNO and can count on the party’s MPs to support this budget,” Mokhtar said.

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