First post-Covid budget sees tighter allocation of RM372.3 billion

The government today tabled its first post-pandemic budget of RM372.3 billion, in what is also the final budget before the 15th general election (GE15), widely expected to be called in the near future. 

This is less than the RM385.3 billion allocated for 2022, revised upwards from the RM332.1 billion initially tabled.

Themed "Strengthening recovery, facilitating reforms towards the sustainable socio-economic resilience of the Malaysian Family", the budget for next year is aimed at continuing Malaysia's economic recovery with emphasis on structural reforms and the strengthening of economic resilience. 

This is the second budget tabled under the government of Prime Minister Ismail Sabri Yaakob and likewise the second since the 12th Malaysia Plan was launched on Sept 27 last year.

The following are some of the major points from the 2023 budget, presented in the Dewan Rakyat by Finance Minister Tengku Zafrul Aziz.

The top three recipients of next year's budget are the finance ministry (RM67.2 billion), education ministry (RM55.6 billion) and health ministry (RM36.1 billion).

Taken together, they comprise 43.3% of total expenditure. 

RM272.3 billion has been set aside for management spending, RM95 billion for development, RM5 billion for the Covid-19 Fund and RM2 billion as contingency savings.

The permanent resident individual income tax rate meanwhile will be reduced by two percentage points.

Zafrul also announced tax savings of up to RM1,000 for the middle-income group and RM250 for the high-income group.

He said the RM250,000-RM400,000 tax income range along with the RM400,000-RM600,000 range would be subject to a 25% tax rate, with a tax cut from 13% to 11% for those in the taxable income bracket of RM50,000-RM70,000.

Those in the taxable income bracket of RM70,000-RM100,000 meanwhile will see a tax cut from 21% to 19%.

Zafrul also said that the EPF voluntary contribution limit would be increased to RM100,000 per year compared to RM60,000 previously.

He likewise announced a tax exemption for women returning to work for the assessment years of 2023-2028.

The government will also make Socso's Self-Employment Social Security Scheme contributions mandatory for all self-employed sectors in stages. 

The total holding limit for Amanah Saham Bumiputera and Amanah Saham Bumiputera 2 meanwhile will be increased to RM300,000 compared to RM200,000 previously.

Zafrul also announced one-off cash aid of RM500 for mothers from Bantuan Keluarga Malaysia households who give birth in 2023, and said the government would bear the cost for B40 youth to obtain taxi, bus and e-hailing licences under the MyPSV programme.

Bantuan Keluarga Malaysia aid meanwhile will be improved with an allocation of RM7.8 billion, to benefit 8.7 million recipients.

Here, a new category of households will be included for those with five or more children and a monthly income of below RM2,500. Households in this group will receive RM2,500. 

Over RM55 billion meanwhile will be set aside for subsidies, aid and incentives to alleviate the cost of living.

A total of RM200 million will be provided for incentives, promotions and marketing to strengthen the recovery of the tourism sector.

RM305 million meanwhile will be allocated for the Orang Asli, including for social aid and the uplifting of living standards, RM1 billion for the welfare of senior citizens, and RM1.2 billion for persons with disabilities. 

Incentives of RM600 to RM750 will be provided for three months to employers who hire persons with disabilities, Orang Asli, ex-convicts, and women who return to work.

Zafrul also announced e-wallet credit worth RM100 for the M40 group with an annual income of below RM100,000 under the e-Pemula M40 initiative, and said tax relief for childcare fees valued at RM3,000 would be extended until assessment year 2024.

A 15%-20% discount meanwhile will be given for PTPTN loan repayments from Nov 1, 2022 to April 30, 2023.

Zafrul said federal government revenue is expected to decrease by 4.4% in 2023 to RM272.57 billion from a growth of 22.0% (RM285.22 billion) in 2022.

He said fiscal deficit is expected to reduce to 5.5% of GDP in 2023 from 5.8% in 2022.

Fiscal deficit is expected to be consolidated at a gradual pace with the overall balance averaging at 4.4% of GDP in the Medium-Term Fiscal Framework 2023-2025.

Zafrul also said that the government might extend the statutory debt limit of 65% of GDP in the medium term after the expiry of Act 830 on Dec 31, 2022.

In economic and fiscal outlook reports released ahead of Zafrul's budget speech in the Dewan Rakyat, the government had said it was taking a cautious approach to a "challenging" 2023 due to geopolitical tensions, rising global inflation, tightening financial conditions, and supply chain disruptions.

"The 2023 budget aims to provide favourable conditions and ensure a balance between economic needs and fiscal consolidation," Zafrul said in the fiscal outlook report as quoted by Reuters.