KUALA LUMPUR (May 6): The Malaysian federal government has approved a contribution of RM440 million to the State Reserve Fund (Kumpulan Wang Rizab Negeri) to assist state governments that are in a deficit to better manage their financial affairs and implement their respective development projects following the Covid-19 pandemic.

The decision was made in the National Finance Council’s meeting earlier today that was chaired by Prime Minister Tan Sri Muhyiddin Yassin and attended by all state chief ministers.

"The federal government takes cognisance of the situation experienced by most state governments that are facing difficulties, especially in state financial management in the post-Covid-19 pandemic [world]," the Ministry of Finance (MoF) said in a statement today.

Following the council's meeting, the MoF announced a slew of added contributions and incentives from the federal government to help the state governments cope with the economic pressures as a result of the ongoing pandemic.

Taking note of the drastic reduction in the state governments' revenue due to Covid-19, the federal government has allocated RM260 million to the state governments to help them implement small-scale projects.

The MoF noted that the first distribution of RM60 million had already been channelled towards the states, with the maximum limit for each project set at RM100,000 through the lottery method to ensure that the distribution of allocations can benefit bumiputera small contractors fairly.

The federal government also decided to increase its allocation for the Economics, Infrastructure and Welfare Development-Based Grants (TAHAP) from RM350 million previously to RM400 million, which will benefit all state governments in the country.

The MoF said the increase in the allocation is to provide additional incentives to the state governments to fund their ecological fiscal transfer (EFT) activities to ensure the sustainability of the country's biodiversity.

The federal government also agreed to improve and expand the definition of state road maintenance under the guidelines for the use of funds from the Malaysian Road Record Information System (MARRIS) grant.

This, the MoF said, is to provide flexibility to the state governments to carry out road maintenance work according to priority and urgency in their respective states, thus ensuring the safety of the people, especially road users.

"The federal government is always committed to ensuring that the relationship between the federal government and the state governments is always at its best. This intention is manifested through an increase in allocations channelled in various forms of grants to the state governments each year.

"Therefore, the federal government hopes these contributions will be fully utilised by the state governments, especially in ensuring that the welfare and well-being of the people are always taken care of," the MoF said.