KUALA LUMPUR, Aug 29 — The government announced plans today to boost development spending by 12 per cent as part of its 2009 budget to shore up its popularity amid spiralling inflation and political weakness.
Prime Minister Datuk Seri Abdullah Ahmad Badawi, whose administration has been shaken by an election debacle and slowing economic growth this year, made the announcement ahead of his annual budget speech in Parliament while facing a revitalised opposition led by Datuk Seri Anwar Ibrahim.
Anwar, who was sworn in as a lawmaker yesterday after winning a by-election, wants to unseat Abdullah by Sept 16 through parliamentary defections. Anwar's opposition alliance won an unprecedented 82 of Parliament's 222 seats in March general elections — 30 short of a majority.
The Finance Ministry said in a report released at the start of Abdullah's budget speech that development expenditure is projected to rise to RM51.7 billion in 2009, up 11.8 per cent from RM46.3 billion this year.
"The government will continue to undertake steps to further enhance the nation's economic resilience as well as cushion the public, especially those in the low income and vulnerable groups, from the adverse impact of rising prices," the report said.
Development spending — a quarter of the RM205 billion budget — includes poverty alleviation programmes, efforts to upgrade roads and transport, educational skills training, health care and housing projects.
Abdullah's budget announcement is expected to include specific measures to help the public, such as improving public transport amid high gasoline prices and possibly reducing income tax.
The Finance Ministry's report said Malaysia's economy is expected to expand by 5.7 per cent this year and 5.4 per cent in 2009, slowing from 6.3 per cent growth in 2007.
"The underlying strength of our economy is the strong domestic demand, which has become a key driver of our growth," the ministry said.
The fiscal deficit was forecast to widen to 4.8 per cent of gross domestic product in 2008 and 3.6 per cent next year after achieving a low of 3.2 per cent in 2007.
Fuel subsidies to keep the retail price of gasoline affordable are expected to soar by 142 per cent on year to RM18.1 billion this year, the finance ministry's report said.
However, it noted the government's 2008 revenue would likely grow a sturdy 15.5 per cent to RM161.6 billion because of favourable commodity prices, higher crude oil export prices and better tax enforcement.
Inflation spiked to 8.5 per cent in July, the highest level in decades, after the government hiked gasoline prices by 41 per cent in June to slash the runaway subsidy bill. Officials rolled back gasoline prices 5.6 per cent last week and said further cuts are likely to quell anger. — AP
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