Record RM421 Billion Budget Focuses on Civil Servant Pay Raises

KUALA LUMPUR: Prime Minister Datuk Seri Anwar Ibrahim unveiled Malaysia’s fifth consecutive record budget of RM421 billion on Oct 18, marking a significant RM13.5 billion increase primarily driven by civil servant salary revision bonuses. This is the first pay raise for government employees in over a decade.

Despite the budget boost, Anwar, who also serves as Finance Minister, opted against increasing development expenditure, focusing instead on infrastructure projects aimed at enhancing public well-being and supporting industrialisation.

Civil Servant Pay Raises

Kenanga Investment noted that the salary hikes for civil servants are expected to stimulate Malaysia’s domestic consumption, driving demand in key sectors like retail, hospitality, and consumer products. The increase in disposable income will be positive for the economy.

However, the caution is that the long-term success of this policy would depend on maintaining fiscal sustainability and managing potential inflationary pressures from increased consumer demand.

The consumer price index is projected to ease to 1.8 per cent in 2024, down from 2.5 per cent in 2023, but is expected to rise again to between 2 per cent and 3.5 per cent in 2025. This is partly due to further subsidy cuts, including RON95 fuel and education for higher-income groups.

Bloated Civil Service

The RM12 billion increase in income for 1.6 million civil servants and 900,000 pensioners is expected to sustain private consumption. However, concerns remain about the productivity of a bloated civil service and the allocation of large sums of public funds toward it.

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