Thursday, March 24, 2016

MOF Smackdown…Of Me

Mea Culpa!

Last week, the government tabled a supplmentary supply bill in Parliament, seeking retrospective approval for RM3.3 billion extra in spending allocation for 2015. The usual headlines ensued.

My impression had always been that supplementary bills of this sort (and we’ve had one every single year that I can recall) were additive to the original annual budget estimates i.e. the government overspent the previous year, and had to seek Parliamentary approval for the overspend. I didn’t really have a problem with this, because MOF has also always been pretty conservative with their revenue estimates. On occasion the extra collection can be pretty large – in 2011 for example, they underestimated actual revenue by 11.2%(!).

In coversation with a senior MOF official yesterday (actually, it was more of a polite scolding), it turns out I was wrong.

We’re still looking at a case of overspending, but the supplementary bills are not necessarily an addition to the original budget. It turns out they only cover cases where some ministries have overspent their allocation; but as some ministries also don’t fully utilise theirs, the impact on the aggregate budget isn’t necessarily the same as the figure in the supplementary bill. We could for instance have a situation where even a largish supplementary bill might not imply an increase in actual versus planned government outlays.

I’ll probably need to reach out to MOF to clarify the situation further (for example the implication that parliamentary budget allocation approval is at the ministry/agency level), but it looks like the supplmentary bills aren’t exactly what they seem.

So, humble pie time. Mea Culpa!


  1. So is this a case of shifting the budget from one ministry to the other en hisham?


    1. @Azlan

      That's one of the things I want to get clarified

  2. Haiii.. Sobat q semua yg lg demen main judi togel, nih ada solusi yg tepat and akurat..
    Krna sy udah buktikan, kalau sobat mau tau info lebih lanjut Call aja Mbah Suro atau Eyang Suro di nmr 082354640471 di jamin deh brankas bandot pasti jebooll... Thanks sobaattt

  3. more of a reconciliation exercise, recouping the already spent 2015 supplementary through CFAW and CRAW as well as accounting operating surplus (residual of revenue - oe) as part of expenditure because we practice cash budgeting/accounting (so, no c/f or b/f thing like in accrual).

    1. @anon 12.05

      Thanks but I'm not catching your meaning precisely. I think I understand the second part (I know about the cash accounting approach), but what are CRAW and CFAW?

    2. CFAW - contingency fund advanced warrant, a fund set at certain amount (around RM1bn - RM2bn) used for urgent needs or unforeseen circumstances which not being allocated for under original budget and require immediate money to be spent. so, instead of going to parliament for direct supplementary which takes quite some time, treasury will issue CFAW to allow agencies to spend asap.

      CFAW is for operating expenditure.

      CRAW - Contingency Reserve Advanced Warrant is for development expenditure. The concept is quite similar, but CRAW is meant for development project which requires additional cashflow because of the progress or kind of things related to project.

      The amount of CFAW and CRAW issued has been taken into account when spent for deficit calculation. When issued, it must be recouped or reimbursed with the same amount been used, for next cycle if necessary and this recoupement or reimbursement is what is happening in this supplementary supply bill on top of the transfer of operating surplus to Development fund which is accounting in nature.

      Hope answer you. If not, my bad :)

    3. @anon

      Thanks, that explains a lot. Basically, overspending draws on the approved contingency funds first, but must receive retrospective parliamentary approval. Is that right?

  4. This is off-topic, but do you plan to issue a commentary on the Singapore Budget 2016?

    What I'd like to know is how the Singapore Government can plan to increase opex, transfers etc and still come up with a projected budget surplus of about 8 per cent of GDP?

    The rating agencies are gonna love this and keep Singapore's triple-A credit ratings intact!

    1. Actually it's a budget surplus of 0.8% of GDP, if u look at the nitty-gritty of SIN Budget 2016.

      And they wouldn't have achieved the surplus had it not been for the inclusion of "NIR" (Net Investment Returns) of S$14.7 billion from Temasek, GIC & MAS.

      An interesting approach, but otherwise it's a prudent & targetted Budget 2016 for Singapore.

  5. The crux of the matter is that some ministries overspent and some underspent the amounts asked for &/or approved under the Budget. The Auditor General has repeatedly highlighted some of the really gross misdemeanours &/or malfeasances (one shouldn't spend what has not been allocated), yet the guilty parties (ultimate responsibility: the ministries) have been getting away with murder, so to speak, because they get to make the same outrageous estimates year in, year out.
    Please note that the ministries (and agencies under them) that underspend are just as bad, diverting much-needed resources (Budget allocations) to (it would appear) pie-in-the-sky pet projects that look brilliant on paper but are never put to the litmus test of implementation. Then, as the clock runs down, a frenzy of cover-your-ass (pardon the expression) spending would ensue (including on non-budgeted items) just to reduce the apparent surplus.