RM60B for 2 years stimulus budget - Malaysiakini

KUALA LUMPUR, - Deputy Prime Minister Datuk Seri Najib Razak announced today a RM60 billion stimulus package as he painted a gloomy picture of the Malaysian economy in the face of a global recession.

The whopping sum will be spent over two years as the country faces up to the reality of falling exports and drastically lower revenue.

The package, announced in Parliament today, includes RM3 billion in tax incentives, and will see RM10 billion of equity investments and RM15 billion in fiscal injections, as well as RM25 billion in guaranteed funds.

A total of RM29 billion has been allocated for private sector assistance, while RM5 billion has been set aside for a working capital guarantee scheme to provide capital to companies with an equity of under RM20 million.

A financial guarantee institution will also be established.

"This RM60 billion accounts for almost 9 per cent of the GDP. The implementation of such a large stimulus package is unprecedented in the nation's economic history", he told Parliament.

Of the RM15 billion fiscal injection, Najib said RM10 billion is allocated for 2009 and RM5 billion for 2010. The RM10 billion for 2009 consists of RM5 billion for operating expenditure and RM5 billion for development expenditure.

The higher expenditure will increase the Federal Government budget deficit from 4.8 per cent to 7 per cent this year.

"The Government is confident that the deficit can be financed from domestic sources, given the ample liquidity in the domestic financial system. In addition, the Federal Government debt ratio is still at a prudent level," said Najib.

He said the financing of the deficit will not crowd out the private sector in sourcing funds, particularly from the bond market, which has expanded rapidly and is currently the second largest in the East Asia region.

Najib, who is set to become prime minister on March 31, said the government's growth forecast for 2009 was projected to be between a contraction of 1 percent and a 1 percent expansion, down from a forecast of 3.5 per cent.

Malaysia is a heavily export dependent country and job losses have been increasing as more and more multinationals have started closing plants because of lower global demand for products.

Najib will hope that the new stimulus package will offer him some political room to operate as he prepares to take over as prime minister and Umno president at a time when Barisan Nasional (BN) faces three crucial by-elections.

(See full text of Najib's speech)