Penang’s Budget 2020 supports state vision

Published on 05 Nov 2019.

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RAM believes that Penang’s (the State) Budget 2020 affirms the State’s stance of focusing on its Penang2030 vision, which aims to transform it into a smart and green state. Penang’s digital transformation masterplan and human capital development stands among some of the central pillars of this vision. 

“Based on the budget, Penang is aligning its focus with the Federal Government’s Shared Prosperity Vision 2030. This bodes well for policy-making and implementation,” explains Esther Lai, RAM’s head of Sovereign Ratings.

Penang’s budgeted expenditure is envisaged to decline about 12% y-o-y to RM792.7 mil in 2020. As repayment of loans from the Penang Water Corporation and Penang Development Corporation boosts its liquidity, the State will trim its allocation to statutory development funds to RM150 mil (Budget 2019: RM230 mil). While its planned development expenditure stands at RM269.3 mil – slightly lower than RM306.4 mil in 2019 – RAM expects development programmes to continue. 

That said, the commencement of the Bayan Lepas Light Rail Transit and Pan Island Link 1 highway projects, which collectively amount to an estimated RM15.9 bil, will likely cram on the State’s fiscal space. Meanwhile, Penang is awaiting federal government funding for its ambitious transport masterplan. This could elevate the State’s debt burden (2017: RM62.06 mil owed to the Federal Government) if the planned sale of reclaimed land becomes protracted.

Unlike Sabah and Sarawak that enjoy additional revenue sources, states in Peninsular Malaysia typically have limited avenues to raise their income. This is evident from the Penang state government’s latest projected revenue of RM519.2 mil, only a meagre 2.7% higher than last year’s RM505.5 mil. 

Meanwhile, the state government is mulling ways to mobilise its revenue through enhancement of tax collections and alternative investment strategies (end-2017: about 98% of total investments comprised fixed deposits). In addition, RM10.98 mil of tourism grants – a new source of revenue – were accorded to Penang in 2019. The Federal Government has also announced that RM100 mil has been earmarked for the construction of a new cable car system in Penang Hill. Tourism-related income is anticipated to contribute more to the State’s coffers, in conjunction with the Visit Malaysia 2020 campaign. 

While Penang’s fiscal position is projected to post a narrower deficit of RM273.50 mil (Budget 2019: RM395.69 mil deficit), its fiscal reserves, estimated at RM1.97 bil as at end-2017, shield the State from any near-term fiscal shortfall. 


Analytical contact
Toh Wei Liang    
(603) 3385 2620

Media contact
Padthma Subbiah
(603) 3385 2577


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