DAP hopes that the Finance Ministry can explain the negative impact of the falling crude oil prices on the 2015 budget of RM 273.9 billion, comprising operating expenditure of RM 223.4 billion and development expenditure of RM 50.5 billion. The 2015 budget depends heavily on oil-related revenue.
In 2013, oil-related revenue of RM 63 billion accounts for 29.5% of total government revenue, comprising tax income and royalties of RM36 billion and Petronas dividends of RM27 billion. According to the Estimates of Federal Government’s Revenue 2015, oil-related revenue is calculated based on crude oil price (Tapis) of USD 110 per barrel in 2014 and USD 105 per barrel in 2015.
Crude oil prices has fallen to a four year low of USD 80-85 per barrel over the past two weeks. According to an estimate reported by The Edge Financial Weekly, every USD 1 per barrel drop in crude oil prices would cost the federal government about RM650 million in revenue. A 10% fall in oil prices will worsen the fiscal deficit by 0.2%, even after accounting for lower fuel subsidies.
Clearly the estimate of oil price at USD 110 per barrel for 2014 and USD 105 per barrel is overly optimistic and unrealistic. With lower crude oil prices by as much as 20% likely to be the new regime, is there a need for fresh budget calculations flowing from reduced oil-related revenue. In other words, a 20% drop in crude oil prices will cause the fiscal deficit to worsen by 0.4% of GDP.
Budgeting is a dynamic exercise. Prime Minister Dato Seri Najib Tun Razak has a moral obligation and statutory duty to constantly update Parliament, particularly when the basis of the budget is not accurate anymore. Is a revised 2015 Budget necessary as a consequence from the 20% drop in crude oil prices with a new projected fiscal deficit, that is higher than the projected 2015 fiscal deficit of 3% of GDP to 3.4% of GDP?