KUALA LUMPUR: Malaysian Prime Minister Najib Razak announced a populist budget on Friday that targets his party's traditional voter base, as he looks to shore up dented support ahead of a tough election that must be held by August next year.
Najib, whose term ends in June, is under pressure to win over voters upset with rising soaring costs and a corruption scandal at state fund 1Malaysia Development Berhad (1MDB).
"I stand here today ... to bring happy news that will put a smile on everyone's faces," Najib said at the start of his budget speech to parliament.
Malaysia's higher economic growth and revenue this year, aided by higher oil prices, allows Najib to propose higher spending ahead of elections, but at the same time project a lower fiscal deficit in 2018 than for this year.
The government will spend a total of 280.25 billion ringgit (US$66.1 billion)in 2018, up 7.5% from this year's anticipated expenditure of 260.8 billion ringgit.
Spending will include aid packages worth 6.5 billion ringgit for farmers, fisherman and rubber tappers, the largest allocation yet for the groups that are among key voters for Najib's ruling Barisan Nasional (BN) coalition.
Najib also located 6.5 billion ringgit for rural infrastructure development, and waived tolls from key highways in several cities. Big allocations were also made for road projects and schools.
The prime minister announced an allocation of 6.8 billion ringgit, same as the previous year, for an annual cash handouts programme. He allocated 3.9 billion ringgit for goods and transport subsidies and set aside 2.2 billion ringgit to help home ownership under various programme.
Income tax will be cut by 2 percentage points for Malaysians those earning between 20,000 and 70,000 ringgit a year.
Najib was widely expected to present a populist budget to try to boost support for his party at a time when former prime minister Mahathir Mohamad, who has quit the party, is leading a vigorous effort to remove a government he says is corrupt.
Najib has also been dogged by a multi-billion-dollar scandal tied to the state fund 1Malaysia Development Berhad (1MDB), a fund that he helped set up.
He has denied any wrongdoing and his government has made only perfunctory efforts to investigate the scandal. The US Department of Justice, however, is attempting to recover hundreds of millions of dollars worth of assets acquired with money looted from the fund. Swiss authorities are also investigating 1MDB, and Singapore has tried, convicted and sentenced a handful of bankers complicit in laundering funds diverted from 1MDB.
The Malaysian economy expects full-year growth of between 5.2% and 5.7% this year, rebounding strongly from 4.2% in 2016. Growth is seen at 5% to 5.5% next year.
Despite increased spending, the fiscal deficit is seen narrowing to 2.8% of gross domestic product in 2018 from 3.0% this year.
Najib said his administration remained committed to narrowing the fiscal deficit. "What is important is that the government maintains the fiscal consolidation target," he said.