Federal Budget 2019: Sarawak and other Petroleum States to the Rescue

(DAH IKHWAN Blog) – A sum of RM 316.55 bil. is allocated for Federal Government Expenditure in 2019, an increase of 12.15% over the 2018 figure, though the people were actually braced for a more austere budget following discoveries of cases of  ‘misappropriation of funds’ and ‘misinformation on government debts level’  committed  by the previous BN Government. This is also achieved in spite of the scrapping of GST which started last year.

How  did the Federal Government achieve this? From a quick  research done, there should be a big net reduction  in government revenue  by  approximately RM 21 bil  following the introduction of SST that replaced GST.  This is a huge gap  that should necessitate an increase in other taxes  or a windfall from Petroleum revenue sources, and it will be hard to imagine  such tax  increases without widespread  protests from the people. Hence,  the government  increased  some minor duties and taxes, but these can  only raise  minimal amount for the federal government revenue.

An analysis of the budget figures however indicates that the revenue shortfall is met by increase in PETRONAS  contribution to the Federal Coffers from an expected increase in Oil and natural gas prices as well as  a special dividend of RM 30 bil from PETRONAS. Apparently, the special dividend  is provided from uncommitted  financial reserves  of PETRONAS, which is fast dwindling if this practice continues. From my analysis of PETRONAS Balance Sheet for the year 2017, such a special dividend, as expected,  is not sustainable and would not  likely be  available in future budgets. For this reason, budget for the next few years are likely to be  more austere, unless there are large increases in Federal Government debt.

Unwilling as they are though, through the above huge PETRONAS contributions,  Sarawak, Sabah  and other poor  Petroleum states have again been forced to  come to the rescue of Federal Government to meet an equally huge appetite of the already rich Peninsular states. And this has been going on for the last thirty five years!!!