How can PM Najib convince sceptics about his budget revisions when he himself can’t get the figures right?

Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 22nd of January, 2015

On the 21st of January, 2015, the day after PM Najib made his announcement on revisions to the 2015 budget, the Edge carried a story entitled “Market seems sceptical about revised Budget 2015”. Some of the scepticism revolves around over-optimistic projects about the average oil price in 2015 as well as the government’s ability to keep to its projected revenue and expenditure promises.

But PM Najib’s own inconsistent budget figures probably made it more difficult to sceptics to believe the accuracy of the revised numbers.

Firstly, PM Najib announced that the “Development Expenditure of RM48.5 billion for 2015 will be maintained and spent.”[1] This statement by PM Najib is highly confusing since in his 2015 Budget Speech, the development expenditure was announced to be RM50.5 for 2015.

Just to make sure, I checked the Budget Estimates and the latest circular from the Treasury and both of these documents confirm that the development expenditure set aside for 2015 is indeed RM50.5 billion.[2]

While a difference of RM2.0 billion may not seem like a lot to PM Najib given than it represents less than 1% of the overall budget, this kind of discrepancy calls into question whether or not he has a good grasp of the exact estimates of the revised budget deficit in absolute terms.

In his speech on Tuesday, 20th of January, he also stated that the “Consensus among economists is that the forecast price of USD100 per barrel used in the 2015 Budget is no longer realistic. They now estimate the average oil price in 2015 to range from USD40 to USD70 per barrel.”

But according to the Treasury’s Estimates of Government Revenue 2015, the oil price used to calculate the 2015 budget was USD105 per barrel and not the USD100 stated by PM Najib in his speech on Tuesday. A difference of USD5 per barrel is not a small amount. A change in the estimate for the price of oil from USD110 per barrel in 2014 to USD105 per barrel in 2015 resulted in an estimated decrease of RM2.675 billion in the Petroleum Income tax from RM28.275 billion in 2014 to RM25.6 billion in 2015 representing a 9.5% decrease.

While PM Najib and those in the Ministry of Finance may argue that the difference of USD5 per barrel is as a result of using the price of the Tapis blend of crude oil which is found in Malaysian waters and sells at a premium to Crude Oil Brent [3], these seeming discrepancies raises doubts as to the accuracy of the revised budget figures presented by Najib.

It was telling that PM Najib choose not to present a revised estimated budget deficit figure but instead presented the revised budget deficit as a % of GDP, in this case 3.2% versus 3.0% for the originally announced budget. The estimated budget deficit for 2015 was RM38.7 billion according to Najib’s 2015 budget speech last year but no new figure was given during the revised budget speech. Could it be that Najib himself is unsure of what the estimated budget deficit is in absolute terms, after the most recent budget revisions?

These discrepancies and many other related questions pertaining to the revised budget is why we feel it is absolutely necessary for Najib to table the revised budget in parliament so that Members of Parliament can seek greater clarification during the ensuing budget debate and the two Finance Ministers as well as the two Deputy Finance Ministers can illuminate us and the larger public regarding these revised budget figures.

As it is, PM Najib, with his inconsistent figures, have not convinced his sceptics in the market nor many of his fellow MPs in the Dewan Rakyat.

[1] (English version) The BM version gives the same figure of RM48.5 billion in development expenditure: