Differing figures between the Treasury's Economic Report 2007/2008 and Prime Minister Abdullah Ahmad Badawi's budget allocation for development spending could result in a higher budget deficit than expected.

Singapore's Business Times reported that the economic report gave a figure of RM40 billion which is 2.1 per cent lower than the figure in 2007 and indicating a slightly contractionary budget.

However, the figure given by Abdullah in his Budget 2008 speech was a record of RM48.1 billion - 15 percent higher than in the previous year.

Abdullah and the economic report have both maintained that the federal budget deficit will continue to shrink - from 3.3 percent of gross domestic product in 2006 to 3.2 percent in 2007, and 3.1 percent in 2008.

An economist at a Malaysian bank quoted by Business Times said Abdullah's low budget deficit figure was "impossible" because the economic report states quite clearly that a deficit of 3.1 percent would be attained on development spending of RM40 billion and not RM48 billion.

Aside from the development spending discrepancy, figures including operating expenditure, overall GDP growth and the deficit figures in the Economic Report and Abdullah's speech correspond exactly.

The prime minister's priority has always been to reduce the budget deficit - a feature of Malaysia's economy since 1998. Former premier Dr Mahathir Mohamad promised to balance the books by 2005.

However, Deputy Prime Minister Najib Abdul Razak said recently that the government 'no longer' has a time frame for balancing its books.

The main reasons being slowing external demand and a greater reliance on consumer and public spending.

Political pressure

Furthermore, Abdullah's initial spending cuts when he took over as prime minister in late-2003 caused considerable resentment among business and the resulting pressure forced him to backtrack by early-2005.

There is even greater political pressure now on Abdullah to keep the tap of public spending flowing because a general elections is expected to be called next year.

With Abdullah's 'new' numbers, the budget deficit is likely to increase next year instead of declining despite slightly higher estimated growth of 6 to 6.5 percent in 2008 compared with 6 percent in 2007.

This could mean that Malaysia's sovereign credit ratings - where better ratings allow a country to borrow more cheaply abroad - are unlikely to be raised anytime soon.

Malaysia tried to get its credit ratings lifted this year at meetings with Moody's and Standard and Poor's in New York and Japan but neither agency agreed.

Both expressed satisfaction at the general tone of the economy but reservations over government finances.

Shocking difference

In an immediate reaction, Opposition Leader Lim Kit Siang said that discrepancies were shocking as it would also affect the budget deficit.

"The difference in figures will also affect budget deficit. It will not be 3.1 percent but 4.6 percent," he told malaysiakini.

"It doesn't reflect well on the budget preparation. The confidence of the public must not be undermined," he added.

Earlier, he raised the issue in Dewan Rakyat, saying that the government must explain where the RM8 billion came from.

He added that there must also be a breakdown on how the additional money will be spent.

"How could this happen? This is the worst budget in Malaysian history. We're looking at RM8 billion scandal in the budgeting," he said.

BN member of parliament for Muar Razali Ibrahim responded to Lim by saying that the "small confusion" could be explained during the next sitting after the fasting month, a suggestion which was rejected by Lim.

Some analysts however told malaysiakini that the discrepancies don't mean much as the Economy Report figures are just projections.