08 January 2016•Update: 08 January 2016
By P Prem Kumar
KUALA LUMPUR
Malaysia’s prime minister announced Friday that the government will be forced to amend its annual budget for the second time in two years, as the national revenue decreases due to dropping global crude oil prices.
Najib Razak, who also serves as finance minister, said that the 2016 budget of $60.87 billion had been drafted based on assumed crude oil prices of $48 per barrel, whereas the latest prices hover at less than $33 per barrel.
"I propose to table a restructured budget for 2016 that we will re-calibrate from several aspects so that it is more realistic and in line with the economic situation,” the premier said in administrative capital Putrajaya.
Razak acknowledged that Malaysia expects a more challenging global economic situation this year.
He listed the dwindling economic growth of China, the world’s second largest economy and Malaysia's biggest trading partner, as well as an interest rate hike by the U.S. Federal Reserve and the strengthening of the dollar as factors that would indirectly impact the country's economic expansion.
"I will also outline additional measures that we need to take and new emphases for us to face this situation. We will ensure that our main objective is to prioritize the people," he stressed.
"To manage the challenges in 2016, firm and more responsive action is required not only by the Finance Ministry but the entire government, government-linked companies and the people as a whole,” Razak added.
"We have to manage our resources efficiently and optimize them. We have to be ready to think of the best method to ensure our economy is sustainable."
A revision to the 2016 budget, which was announced in October last year, set to be announced by the government will take into account the country's falling revenue from lower oil prices and uncertainties in the global economy.
The government has, however, expressed its commitment to projected economic growth of between 4 percent and 5 percent this year, with inflation rates remaining low at between 2 percent and 3 percent.
During the first nine months of 2015, Malaysia's gross domestic product, or GDP, expanded by 5.1 percent.
Malaysia is ranked among the top four oil-producing countries in the Asia-Pacific region, and its national company Petroliam Nasional Berhad (Petronas) is one of the biggest oil firms in the world.
Malaysia was an oil revenue-reliant country, where dividends from Petronas account for up to 40 percent of the government's revenue.
However, taking into account the latest developments in oil prices, the government introduced last year a broad-based consumption tax of six percent, to mitigate losses from Petronas' dividends.
The goods and services tax also reduced Petronas' contribution to the government revenue from 40 percent to 17 percent.
