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Sarawak’s revenue drops by RM1 billion as oil prices decline

 | May 19, 2017

Sarawak Legislative Assembly told state revenue, with oil and gas contributing nearly 40%, is decreasing while expenses, including on infrastructure, are rising.

Wong-Soon-KohKUCHING: The Sarawak government reported a drop of about RM1 billion in revenue due to lower dividends from oil and gas companies and lower cash compensation in lieu of oil and gas rights.

The state’s Second Finance Minister Wong Soon Koh reported a total revenue of RM5.91 billion for 2016 compared with RM6.955 billion the prior year. It is a 15% drop, amounting to RM1.045 billion in revenue.

“As an open economy, we are susceptible to global economic conditions,” said Wong in his winding-up speech at the Sarawak Legislative Assembly today.

The state government expects the global economy to remain challenging in the near term in the face of volatility in commodity prices, particularly oil, and pressure on global interest rates.

The state’s revenue, with oil and gas contributing nearly 40%, was on a decreasing trend, Wong said, attributing the decline to sustained “unfavourable” global oil and gas prices.

On the other hand, Wong said, the increasing demand for basic amenities, infrastructure and services had resulted in rising operating and development expenditure.

In order to sustain growth, the state has to finance its increased budget allocation by tapping into the reserve it built up over the past years.

Sarawak has a reserve of RM27 billion, most of it in the form of equity in state firms.

Revenue in the first quarter of 2017 was reported at RM1.852 billion, which is 35% of the total estimated revenue of RM5.32 billion for the year.

Total ordinary expenditure in 2016 totalled RM5.564 billion. Out of the total, RM2.264 billion was to meet operating expenditure and RM3.3 billion was appropriated to replenish the state’s Development Funds Account.

Annual operating expenditure is rising. For 2016, operating expenditure increased to RM2.264 billion from RM1.889 billion in 2015, an increase of RM375 million or 20%.

Development expenditure for 2016 was RM3.919 billion. Of the amount expended, RM1.925 billion, or 49%, was for rural development.

 


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