Saturday, September 4, 2010

2Q 2010 Federal Government Budget and National Debt Update

I’ve kept this on the back burner since last week because there have been more immediate news to attend to. But now I’ve had some time to go over the stats, the government fiscal position looks pretty decent if you’re a believer in fiscal consolidation (quarterly, RM millions):


All the components are running a little below the 2010 budget projections, except development spending which is way below at RM19 billion, which is just 37% of the full year allocation.

Looking at breakdown of revenue, the contribution of direct and indirect tax components have been trending down over the years, but the implied revenue loss has been fully covered by increases in non-tax revenue:


I know what you’re thinking, but it's not from petroleum royalties – the biggest growth has been from returns on investments and interest income. I guess the boys at Khazanah must be doing a good job.

As a result, the effective tax rate (direct taxes as a percentage of nominal GDP) has hit its lowest point since 2000, which of course was the last time Malaysia was in recession:


Paradoxically, debt levels are actually running ahead of projections, the government having borrowed a net RM25.7 billion so far this year compared to a budget projection of RM41.1 billion – about RM8.5 billion more than the actual shortfall. Almost all of that is now sitting in the government’s account at BNM (monthly, RM millions):


All told, government borrowing increase by RM17.4 billion in June and July alone (monthly, RM millions):


That puts the latest official figure for the national debt at RM394.7 billion as at July 2010. I think this is a combination of two things: potential MGS and GII maturation, and payment for projects and expenditure this quarter – for instance the bonus payment of RM500 per person announced for the civil service.

Economic recovery however means that the debt/GDP ratio has flattened out:


I suspect when all is said and done, 1Q 2010 will mark the peak for this cycle.

Debt per capita has continued to climb, but has come off the pace of last year:


As of June, debt per capita is at about RM13,566 or about 50% higher than it was at the end of 2007. After adjusting for inflation, the level is at about RM10,966 in 2000 prices, or just over double the level 10 years ago. That’s not too bad compared to expectations we had last year.

No comments:

Post a Comment