Budget 2015 “revision” is just a PR exercise, USD55 per barrel price unrealistic

Najib in budget 2015 review

Media statement by DAP National Political Education Director and MP for Kluang Liew Chin Tong on 20th January 2015

On 27 October 2014, when the crude oil price was hovering at the US$80-85 per barrel mark, I called on Prime Minister and Finance Minister Dato’ Seri Najib Razak to revise the budget which had been based on oil revenue assuming a crude oil price of USD110 per barrel in 2014 and USD105 per barrel in 2015.

In the months to come, several other Pakatan Rakyat leaders and I reiterated the call for Najib to do so. Finally, at a live-televised announcement at 10am this morning, the half-hearted so-called Budget “Revision” was announced.

Surprisingly, the Revision chose to set the crude oil price for 2015 at USD55 per barrel – a price which is not only cosmetic and unrealistic but also smacks of being in denial about current market forces and trends.

While we cannot discount the possibility of oil price going up again but what is expected of Najib is to present the scenarios of oil price at USD 40, USD 30 and USD 20 and how the Government would react in such scenarios.

Setting the crude oil price at USD 55 per barrel gives Najib the comfort of changing nothing substantial in Budget 2015 yet still claiming that budget deficit would only increase from 3 percent to 3.2 percent after revision.

Such public relation exercise fools no one. Every discerning observer knows that crude oil price is more likely to be less than USD 55 per barrel than otherwise.

It is by now very apparent that the revised Budget 2015 is Najib’s attempt to placate the concerns among rating agencies and investment banks after Credit Suisse’s statement on 8th January 2015 over the impact on fiscal deficit as a result of falling crude oil price.

Grave misstep proves Malaysia’s leadership crisis

Presenting a revision to Budget 2015 without addressing the real challenges is only proving that Malaysia is in a leadership crisis, as Najib doesn’t even understand the fast changing global economic realities, not to mention improving and change them.

Najib has effectively wasted a crisis to bring forth meaningful reform or to outline strategies to prevent further slide of the Malaysian economy.

His “Malaysia is not in a crisis” pronouncement is indeed the source of a crisis of confidence: that the Malaysian government is incapable of understanding the challenges ahead.

There was no attempt to address the multiple economic concerns Malaysia is faced with which may end up in a perfect storm that will catch us all off-guard.

Why not slash the PMD’s budget instead?

While I do not advocate austerity per se, if anything should be slashed from the Budget, there should be massive cuts to the Prime Ministerial budget. The development budget at RM48.5 billion was spared on the basis that we are still proceeding to pump-prime the economy.

But of the RM48.5 billion development allocation, RM13 billion is actually allocated for the Prime Minister’s Department.

And of which RM 7.08 billion consists of what I called “Prime Ministerial slush funds” like facilitation fund (RM2.5 billion), special projects (RM1.6 billion), development programmes (RM1.1 billion), social restructuring programmes (RM750 million), people friendly projects (RM670 million), small projects (RM300 million) and poverty-related projects (RM160 million).

These discretionary items, which are approved by the Prime Minister with just a stroke of pen, are not going to help the economy in any meaningful way. These are just an avenue for crony contracts to be awarded in exchange for political support.

In short, the revised Budget 2015 is of very little use to the real world. It is a public relation exercise that fails to convince anyone.

Liew Chin Tong

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