Malaysia plans record budget to bolster economic recovery
Malaysia’s government on Friday proposed a record budget for 2022 to bolster an economic recovery following the coronavirus pandemic, with various industrial incentives and cash handouts for the poor and a one-time tax for high-income companies.
Finance Minister Zafrul Aziz introduced in Parliament the budget proposal of 332.1 billion ringgit ($80.2 billion), up from 320.6 billion ringgit ($77.4 billion) in the current year.
He said a virus lockdown in the third quarter has set back an economic recovery. With 95% of adults and more than 60% of teenagers fully vaccinated, he said the budget is designed to “strengthen economic recovery, build resilience and drive reforms.”
The budget is the first under the administration of Prime Minister Ismail Sabri Yaakob, who took office in August after two changes of government since 2018 elections.
Ismail was the deputy prime minister under Muhyiddin Yassin, who resigned after less than 18 months in office following infighting in his coalition. Ismail’s appointment brought Muhyiddin’s alliance back to power.
It also returned the premiership to Ismail’s United Malays National Organization, which had led Malaysia since independence from Britain in 1957 but was ousted in the 2018 elections amid a multibillion-dollar financial scandal.
Zafrul said Malaysia’s economy is expected to grow 5.5%-6.5% in 2022, up from 3%-4% projected this year after a contraction of 5.6% last year. Despite the increased spending, he said the government’s budget deficit is expected to narrow to 6% from 6.5% this year.
With many livelihoods hit by the pandemic, he said the government will dish out 8.2 billion ringgit ($2 billion) in cash handouts that will benefit 9.6 million poor households and individuals. Nearly 5 billion ringgit has also been allocated to create 600,000 new jobs, he said. The budget also includes about 31 billion ringgit ($7.5 billion) for subsidies, assistance and other incentives to ease the public’s burden, he said.
To boost state coffers, Zafrul said the government will impose a one-time special tax for high-income companies generating more than 100 million ringgit ($24.1 million) in profits. The first 100 million ringgit in taxable earnings will be taxed at 24% while the rest will be taxed at 33%, he said.
Opposition lawmakers asked how the government will raise enough money for the expanded budget and said it didn’t focus enough on helping businesses out of the crisis.
“They will borrow, borrow and borrow. With this budget, the national debt will cross 1 trillion ringgit ($241.4 billion) in 2022. The debt servicing costs for these debts will be 43 billion ringgit ($10.4 billion) in 2022,” bigger than the 32 billion ringgit ($7.7 billion) allocated for health, opposition lawmaker Wong Chen tweeted.
The budget is seen in part as an effort by Ismail and his UMNO party to win back public support, especially that of rural ethnic Malays, and show that it can lead the country again. General elections are not due until 2023, but many expect polls could be called next year.
This story corrects the finance minister’s name.