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BN is punishing the rakyat for its stubbornness (malaysiakini)

Malaysiakini's report:

Is there any immediate risk of the government running out of money?

This question is increasingly being raised as the government’s revenue estimation in Budget 2009 may be significantly affected by the plunge in global oil prices.

klse asia stock share market down crash turmoil 060307In Budget 2009, tabled on Aug 29 by then finance minister and premier Abdullah Ahmad Badawi, the government had used US$125 per barrel as the benchmark to estimate the revenue it would earn from sales of crude oil.

However, global oil prices have since dropped by half - to about US$65 per barrel - and this is expected to adversely affect the government’s income as over 40 percent of the federal budget comes from state-owned oil company Petronas.

lim teck gheeEconomist Lim Teck Ghee, who is director of think-tank Centre for Policy Initiatives, said the government would run a “great risk” of running out of money if the global economic meltdown is prolonged.

“Government revenue will fall drastically if the recession continues for a few years. Not only would Budget 2009 have to be revised but the entire Ninth Malaysia Plan will have to be reviewed,” he told Malaysiakini.

Lim urged the finance minister to immediately revise the budget by taking into account the fall in oil revenue, which contributes close to half the national revenue.

The government’s basis for projected oil revenue in Budget 2009 appears to have been a misjudgement.

Unlike Malaysia, the world’s largest oil producer, Saudi Arabia, had used oil prices of US$65 per barrel in planning next year’s budget.

‘Revise Budget figures’

dr yeah kim lengAnother economist, Dr Yeah Kim Leng, argued that it is crucial for the government to slash its spending as announced by Abdullah yesterday.

Abdullah said that all ministries would be required to put on hold all non-essential projects.

“It’s not an issue of running out of money. It’s either the fiscal deficit will increase or the government will have to reduce its spending and look for new resources,” the chief economist of rating agency Ram Holdings Bhd said when contacted.

pm abdullah ahmad badawi suspend eurocopter ec725 deal ministry of defense event 281008 03“The impact will not be that great because the amount of the oil subsidy (the government pays) will be much less (when the world oil price drops) - there are some compensating elements,” he noted.

Citing the example of Abdullah’s decision to put on hold the RM1.7 billion Eurocopter deal, Yeah said it was essential for the government to cut down its expenditure.

He echoed Lim’s statement that the government should re-examine its spending in Budget 2009 or the fiscal deficit would balloon.

The opposition has called on the government to table a new budget to take into consideration the fall in oil prices and the global economic crisis -

Just because the government refuses to appear to bow to the opposition, they refuse to change the budget. As a result, millions of Malaysians are suffering. Way to go, BN!