Budget 2022 – My Views

By Wong Chen

This article was completed at 5 pm on 30th October 2021.

In this article, I will share my initial views and opinions of Budget 2022. Earlier in the same day, I briefed Anwar Ibrahim, Leader of the Opposition on the budget for about two hours.

The budget was tabled the day before and my officers, volunteers, interns and I, collectively a group of 12 of us, have been dissecting the same for many hours deep into last night. There are some 1,400 pages of document organised into four books.

On a side note, I have been leading Keadilan’s budget analysis for the last seven previous budgets. As such, I do have working and theoretical experience of this esoteric subject matter and can speak with some weight and authority on the same.

The budget is divided into three parts; (a) economic outlook, (b) revenue, and (c) expenditure. The economic outlook document contains many economic projections and these projected numbers are used as assumptions to support revenue projections. Financial projection is not an exact science; you will need historical data, an understanding of economics and a sense of what is happening in the overall economy and markets.

Based on these economic projections, such as GDP growth and other key economic indicators, the government will then try to justify their projected revenue numbers for 2022. These revenue numbers will then be used to set the quantum for operating expenditure (“Opex”). The very same economic numbers will also be used to support the prospective borrowing costs of the government (via the issuance of government bonds and sukuks) which will be used to fund the development expenditure (“Devex”).

Due to the pandemic, the expenditure budget for this year (like last year) has three components; (a) Opex, (b) Devex, and (c) the Covid-19 Fund. The Covid-19 Fund is treated as some form of extraordinary spending item but does have direct impacts on both Opex and Devex.

Now that I have set out the above, I will go straight into some of my key observations about Budget 2022.

Let me start by acknowledging that this budget is the biggest ever in Malaysia’s history; a whopping RM332.1 billion. This amount is divided into Opex of RM233.5 billion, Devex of RM75.6 billion and RM23 billion of Covid-19 Fund. To support this biggest ever budget the government is projecting a robust GDP growth of 5.5 to 6.5% for 2022.

According to the government, this projected growth will generate RM234 billion of tax and non-tax revenues. In last year’s budget debate, almost 50% of my debate was focused on challenging the government’s then projected revenue numbers. My argument was proven correct within a few months after my budget speech, when the government got into a cash flow crunch in early 2021 and had to revise down its 2021 Opex.

Unfortunately for 2022 Budget, I am also calling out the government’s projected revenues to be too high again. In dismantling the government projected figures, I noted that once we remove the tax amnesty gain and the extraordinary RM30 billion Petronas injection from the 2019 budget, the government’s projected 2022 revenues are in fact higher than the pre-Covid revenues of 2019. This is not logical and as such these revenue numbers, in my humble opinion, are flawed, yet again. Since the revenue projections are too optimistic, these in turn will create an unsustainable 2022 Opex. Nevertheless, I hope that this over-estimate will not be too far north, and as such will not disrupt government operations by a wide margin.

Now we move to the question of Devex. This is an extraordinarily large Devex of RM75.6 billion. How big is this? To date, it is the biggest ever in Malaysian budget history. For comparison, the 2021 Devex was RM62 billion, the 2020 was RM51.36 billion. The Devex of RM75.6 billion will be funded by borrowings, primarily in the form of bonds and sukuks. This new debts will push Malaysia’s national debt to above RM1 trillion (RM1,000,000,000,000) in 2022 – yup count them, it has 12 zeros!

Servicing this massive pile of debt alone will cost us RM43 billion next year. To be fair, this deficit debt situation is the result of ill fiscal discipline of successive governments and not just the current administration. The very last time, Malaysia actually registered a surplus budget was in 1997, when my party leader, Anwar Ibrahim was the finance minister. National debt sustainability is a major national concern and Budget 2022 will push Malaysia to a level above that psychological mark of one trillion. This high Devex is also the primary reason why I pondered in my immediate budget Facebook posting, whether this will turn out to be an election budget.

What then was I hoping for in this budget? I was hoping for fiscal sanity that is generous and focuses on economic recovery. But I will definitely not spend obscenely on Devex (which tend to favour the connected and the cronies) and definitely not for any form of mega projects. I would have liked a slightly larger Covid-19 Fund of RM30 billion ( for more SME support), a reasonable Opex of RM225 billion (which is very achievable by reducing wastages and reforming procurement systems) and a Devex of RM55 billion (a more measured and reasonable amount). My wish list would have been a generous pro recovery budget of RM310 billion, and yet save Malaysia RM22.1 billion in unnecessary spending.

I would also specifically venture to reduce the Devex budgets for defence, home affairs and foreign affairs as these Devex spending tend to be for weapons, are prestige and in my opinion, unnecessary particularly when money is tight.

Lastly, I would also bump up substantially the budgets for anti-corruption and democracy focusing on substantially larger budgets for Parliament and the Auditor General office. These increases will not cost more than RM200 million in total. I would hold however hold back an increase in the budget of MACC until we get some reforms within MACC, since MACC has been rocked by corruption and abuses of power allegations of late.