DAP Sabah calls for the
reallocation of the Chief Minister’s Department and the Ministry of Finance’s
expenditure to other Ministries in the upcoming 2013 Sabah state budget.
Even though Sabah has been
enjoying relatively healthy budget surpluses over the past 6 years, Sabah’s
state debt has also increased significantly and now stands at a worrying level.
Even though state revenue
has increased by 236% from RM1.78b in 2005 to RM4.20b in 2010, state debt has
increased by an even higher rate from RM1b in 2005 to RM3.1 in 2010, an
increase of 310%.
This prompted the following
statement from the Malaysian Ratings Agency at the end of 2011:
‘Despite Sabah’s favorable
financial standing in 2010, the state’s public debt was rising at a faster clip
of 30.6% in 2010, owing to bond issuances amounting to RM544 million as well as
new loans granted by the federal government totaling RM168.0 million during the
year.
As a result, public debt
stock as a percentage of total revenue remained elevated at 73.9% in 2010
(2009: 77.9%).
Higher borrowings by the
state are undertaken for the purposes of funding major economic development
projects such as water supplies and low-cost housing.
However, the rapid rise in
the debt level may yield legitimate concerns on the state’s ability to repay
its liabilities, particularly when the amount of cash balances available in
smaller than the size of public debt.
The cast-to-debt ratio has
been dwindling to around 2.5% in 2010 from as high as 4.5% in 2006, implying
the state’s reduced ability to service its debt.’
As a result of this rapid
increase in debt, debt servicing charges has also increased significantly.
For example, debt serving
charges amounted to RM92m in 2010 but was projected to increase to RM145m in
2012, an increase of 57.6% in just two years.
As a basis for comparison, government
revenue was projected to increase by only 22.5% from RM3304m in 2010 to RM4048m
in 2012.
The fact that much of this
debt was incurred for development expenditure and projects shows that (i) the
state government was not prudent in using its budget surpluses for development
expenditure (ii) the state government was not prudent in minimizing the costs
of these projects (iii) the federal government has not played its part in
properly funding development projects in the state.
One of the symptoms of this
lack of fiscal discipline and oversight is the rapid increase in the amount
allocated to the Chief Minister’s Department and the Ministry of Finance, both
of which are under the direct control of Sabah Chief Minister, Musa Aman, who
has been the focus of an international investigation involving allegations of
money laundering via Swiss bank accounts in Hong Kong and Switzerland.
The Ministry of Finance’s
allocation has skyrocketed from RM737m in 2008 to RM1.94b in 2012, a 263%
increase. During the same time period, the overall budget increased from RM2.3b
in 2008 to RM4.1b in 2012, which is only a 76% increase.
The allocation received by
the Chief Minister’s Department and the Ministry of Finance has been increased
from RM1.25 in 2008 to RM2.56b in 2012 and its share of the total budget has
risen from 54% in 2008 to 63% in 2012.
More worryingly, some of the
increased allocations have occurred in items which are lacking in transparency.
For example, one single item under the budget estimates for the Ministry of
Finance entitled ‘Special Expenditure’ or ‘Perbelanjaan Khas’ came up to
RM1.13b, or more than one quarter of the total 2012 Sabah state budget.
What is more worrying is
that this ‘Special Expenditure’ amounted to only RM654m just two years prior,
in 2010! This represents a whopping increase of 73.1% in just two years in the
‘Special Expenditure’ allocation compared to the 22.5% increase in projected
revenues.
DAP Sabah calls for a
thorough disclosure of all the expenditure items in the upcoming budget,
especially the big ticket allocations which are found in the Chief Minister’s
Department and the Ministry of Finance including what the ‘Special Expenditure’
allocation has been and will be spent on.
In addition, DAP Sabah calls
for a reallocation of 40% of the budget of these two ministries – the Chief
Minister’s Department and the Ministry of Finance – to the other Ministries
which have been neglected and underfunded.
That 63% of the state’s
budget is under the control of a single Minister – the Chief Minister in this
case – is not only poor economic policy but also invites abuse of power and
corruption especially when much of this expenditure is not properly accounted
for.
Pakatan Rakyat Sabah will
announce its own Sabah Alternative Budget on Wednesday, 15th of October, 2012
where it will outline how this 40% reallocation will be spent.
This will be in the context
of a comprehensive and forward looking budget to explain how the additional oil
royalty which Sabah will be given under a Pakatan Rakyat state and federal
government will be prudently spent in a manner which distributes social
outreach responsibly and fairly as well as allocates development expenditure
strategically in order to catapult Sabah to a new growth trajectory and to
eradicate poverty in the state.
(This Press Statement by DAP
Sabah Alternative Budget Working Committee - YB Jimmy Wong, Chan Foong Hin, Dr
Joseph Lee and Victor Chong in Kota Kinabalu on 16 Oct 2012)
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