Total Federal Government expenditure in 2014 is expected to remain flat at RM262.2 billion, in tandem with concerted efforts to rein in non-productive expenditure through financial reforms
which will be judiciously pursued without undermining growth.
The Ministry of Finance (MOF), in its Economic Report 2013/2014, said the Federal Government revenue is, however, forecast to be more favourable at RM224.1 billion on account of stronger economic activity across all sectors, better tax administration and revenue collection.
The report is issued in conjunction with the tabling of the 2014 Budget today in Parliament by Prime Minister Datuk Seri Najib Razak, who is also Finance Minister.
"Consequently, fiscal consolidation will be well-paced, with the deficit projected to fall further to 3.5 per cent of gross domestic product in 2014," it said.
Consistent with efforts to ensure fiscal targets for 2014 are met, the ministry said the operating expenditure is expected to grow at a significantly slower pace of 0.7 per cent to RM217.7 billion.
The ministry said total allocation for subsidies, comprising various subsidies (RM27.6 billion), incentives (RM884 million) and social assistance programmes (RM10.9 billion), will decline 15.6 per cent to RM39.4 billion, or 18.1 per cent of operating expenditure.
"This is due to lower provision for fuel subsidies (RM22.3 billion) as the price of refined petroleum products is anticipated to moderate due to tepid global demand.
"Nevertheless, fuel subsidy, at 10.3 per cent of operating expenditure, remains the largest component of subsidies," it said.
Emoluments will get a higher sum of RM63.6 billion following adjustments to salaries of civil servants and armed forces in July 2013.
"The allocation for charged and 'locked-in' items, such debt service charges (RM23.2 billion), pension and gratuities (RM15.7 billion) as well as grant and transfer to state overnments(RM6.7 billion) and statutory bodies (RM16.3 billion), would also see an increase due to rising commitments," it said.
In addition, a sum of RM10.6 billion, or 23.8 per cent of total development expenditure, is allocated under the social services sector for critical areas such as education and training, health, welfare services and housing.
The MOF said Federal Government revenue is projected to be higher at RM224.1 billion in line with the stronger expansion in domestic investment and consumption activity as well as gains from improving external sectors.
The tax revenues are also expected to increase by 5.2 per cent to RM172 billion, supported by firm corporate earnings, access to financing, favourable labour market conditions and rising disposable incomes.
Meanwhile, the non-tax revenues, comprising mainly investment income, licences, registration fees, are projected to be lower at RM52.1 billion.
However, dividend income from Petroliam Nasional Bhd (RM27 billion), Bank Negara Malaysia (RM1.5 billion) and Khazanah National Bhd (RM500 million) will remain stable while proceeds from petroleum royalties, like petroleum income tax, were anticipated to decline (RM5.7 billion).-- Bernama