Malaysia PM unveils 2016 budget to boost growth, woo support

AP News
|
Posted: Oct 23, 2015 9:28 AM

KUALA LUMPUR, Malaysia (AP) — Embattled Malaysian Prime Minister Najib Razak unveiled a proposed 2016 national budget on Friday that delivers benefits for the poor while raising taxes on the rich in a balancing act aimed at trimming a fiscal deficit.

Najib, who is fighting for public support amid a financial scandal, announced 5.9 billion ringgit ($1.4 billion) in cash handouts to more than 7 million low-income families and individuals, up 17 percent from this year. He also raised minimum wages by 11 percent to 1,000 ringgit ($238) per month in peninsula Malaysia, along with salaries for civil servants.

At the same time, he said tax rates will be raised from 25 percent to 26 percent for individuals earning more than 600,000 ringgit ($143,000) a year and to 28 percent for those making more than 1 million ringgit ($238,000).

Najib said Malaysia's economy is expected to grow 4-5 percent next year, compared to 4.5-5.5 percent in the current year, despite being hit by lower commodity and oil revenues, as well as sharp falls in its currency, the ringgit.

"This budget and future budgets will be premised on striking a balance between the capital economy and people economy. We need to achieve an inclusive and sustainable growth as well as build a competitive, progressive and a morally strong nation, with a society that is united," he said in a speech to lawmakers.

Najib has come under intense pressure to resign, with massive street rallies in August, after documents leaked in July showed that about $700 million was deposited in his private bank accounts from entities linked to indebted state investment fund 1MDB. Najib has denied any wrongdoing and said the money was a donation from the Middle East.

Critics slammed the proposed budget as short of substance and aimed at wooing support. Opposition lawmaker Tony Pua said it failed to deal with the 1MDB debts, which have ballooned to more than 42 billion ringgit ($10 billion) in six years, and that the $700 million in Najib's accounts had hurt confidence in his leadership.

Singapore-based Mizuho Bank said the budget was in line with the government's fiscal consolidation efforts while trying to address concerns from the rising cost of living. The government's fiscal deficit is expected to slide to 3.1 percent of gross domestic product next year from 3.2 percent this year.

It said measures including 1.6 billion ringgit for affordable housing, 1.1 billion ringgit for higher civil service salaries and higher minimum wages do not present a major threat to fiscal sustainability.

Najib said the government will make 39 billion ringgit ($9.2 billion) next year from an unpopular new goods and services tax, which will help make up for a drop in oil revenues amid weak oil prices. He pledged to continue efforts to improve public welfare and slammed critics, including "enemies within," for trying to tarnish the country's image.

At the end of Najib's speech, opposition lawmakers stood up holding placards saying, "Where is the 2.6 billion ringgit?" in a reference to the $700 million in his bank accounts, based on an earlier exchange rate.

The budget is likely to be approved by Parliament since Najib's ruling coalition holds a majority of the seats.