The DAP has accused the federal government of creative accounting to create the illusion that the deficit in Budget 2010 has been reduced.

According to DAP publicity chief Tony Pua, numerous big ticket expenditures were "externalised" to wholly or majority-owned government agencies and not recorded in Budget 2012.

NONE This includes the MRT project, reported to cost RM56 billion, the LRT extension project (RM6.5 billion) and the Pembinaan BLT project to build 74 police stations (RM10 billion).

"If all of these ‘off-balance sheet' expenditures, and more which have not been accounted for, are taken into consideration in the federal budget, then the real budget deficit for 2012 will easily be in excess of seven percent.

"This creative manipulation of our federal budget is sheer legalised accounting fraud to present a false picture of financial competence and prudence.

"The accelerated increase in the size of our hidden debts, if unchecked, will sooner or later cause a massive shock to our financial system, not too different from what the Greeks are suffering today," Pua said in a statement yesterday.

'Off-balance sheet' financing

Prime Minister Najib Abdul Razak had announced that the deficit for this year under Budget 2012 stood at 4.7 percent, down from 5.4 percent. The deficit was stated to be 5.6 percent in 2010 and 7.4 percent in 2009.

Pua, who is trained in economics, believes the federal government is engaging in "legalised accounting fraud".

He said the "off-balance sheet" financing mechanism has been used with increasing size and frequency in recent years, causing Malaysia's contingent liability or funds guaranteed by the government to increase from RM84.3 billion in 2009 to RM96.9 billion in 2010.

"This figure would have increased significantly, to above RM100 billion in 2011," he said.

Pua believes that the government is under pressure to present a lower deficit figure to appease investors, demonstrate financial prudence and also to fund its cronies.

"The government is under pressure to spend more in part to support of many BN crony businesses that are not able to secure projects competitively, as well as to increase public investment to cope with the decline in private investment in the country," he added.