Topic 8
Topic 8
Topic 8
Sector Financing
1
Policy on Budget
Annual planning to stimulate economic growth and
provide equal distribution that is supported by a
stable financing.
Objective:
Efficient economic management
Control government spending
Economic growth
Achieve price stability and control inflation
Distribution mechanism
2
National Budget
Record government revenue and
expenditure for a particular year.
Deficit budget (expenditure >revenue)
3
Budget Flow
Malaysia recorded deficit budget most of
the time.
Control spending
4
Public Sector Financing
Spending is made by federal or state
government.
Public expenditure:
Operational budget
Developmental budget
5
Operational Budget
Categorized by object and sector
Expenditure by object: salary, pension, subsidy,
scholarship, state government allocation.
Expenditure by sector: security, social
service, economy, public administration
Operational budget is the largest component of
national budget, a reduction in operational
budget leads to a significant saving in overall
public spending.
6
Developmental Budget
Capital expenditure on socioeconomic project to
upgrade socioeconomic status and stimulate
growth.
Security:
Défense, domestic security
Social Services:
Education, Health, Housing
Economic sector:
Agricultural and rural development.
Public infrastructure and facility, transportation
7
Government Revenue
To cover the cost of expenditure.
8
Tax Revenue
Direct tax , Income tax, Indirect Tax and
Duty
Direct Tax: individual income tax, petroleum
income tax, corporate tax etc
Indirect Tax: Export duty, Import duty, sales tax,
service tax, gambling tax
9
Non-Taxes Revenue & Receipt
10
Public Sector Financing
Explain how government funds deficit
budget.
11
Federal Government Debt
Government obtains loan from individual,
local and foreign financial institute
Type of government debt:
Domestic Debt
Foreign Debt
12
Domestic Debt:
Short and medium term loan
Ex: investment certificate, government
guarantee letter
Foreign Debt:
A long term loan from foreign institution.
Ex: Loan from International Monetary Fund
(IMF)
13
Government Debt Flow
14
Source of Loan
Source of loan varies by type of domestic
and foreign loan.
Domestic:
Government guarantee letter (86 – 89%)
Treasury Bill (6 – 7 %)
Investment Certificate (2 – 3%)
Other sources(3 – 6%)
15
Source of Loan
(continued)
Source of foreign debt is obtained through
specific foreign project loan to fund certain
development project.
Asian Development Bank and World Bank were
main sources of fund during 1970s.
Increase amount of loan from Japan.
Decrease in loan project from US, UK and
Germany.
16
National Budget 2021
Budget Approach
PH VS BN Government
Government
COST SAVING
VS OUTCOME
Surplus Budget
Revenue > OE + DE
Deficit Budget
Revenue < OE + DE:
i) Revenue > OE
COVID Allocation
2020: RM38B
2021: RM17B
Penjana
Economic Economic Bajet
Package
Emergency slow down 2021
RMCO
MCO RMCO CMCO
2
No new COVID wave