Malaysia seen delaying election, eyes new cash handout - sources

By Niluksi Koswanage

KUALA LUMPUR (Reuters) - Malaysian Prime Minister Najib Razak is likely to call elections from October onwards, giving him more time to try to win over voters with another round of cash handouts and a generous budget, senior government sources with knowledge of the issue told Reuters.

Delaying elections from a widely anticipated June date signals Najib's concern that the ruling National Front may struggle to regain its two-thirds majority in parliament as the trade-reliant economy's growth slows from the euro zone debt fallout.

About 2.6 billion ringgit was allocated to poorer households earlier this year, leading the opposition to accuse the government of vote-buying ahead of what could be the most fiercely contested polls since Malaysia gained independence in 1957.

The new handout under consideration would be distributed to over 5 million households ahead of the Muslim festival of Eid al-Fitr in August, the sources said.

The sources said Najib was looking to tap higher government revenue collections to present a generous budget to voters.

"The window for October elections is wide open now. This is the next window after July," said one senior government source who declined to be identified due to the sensitivity of the issue.

"This is a risky election and the prime minister does not want to take any chances. He has to prove to the people that the government will be there for them. So he has to balance his reforms with social economic help," he said.

A senior official in the United Malay National Organisation (UMNO), which dominates the Barisan Nasional (BN) ruling coalition, confirmed that October onwards was now the most likely date for the polls.

"After September is what we have been told for the timing of the elections," the official told Reuters.

"We are on red alert but nothing is happening for now. The leadership is looking at an election budget to sweeten the deal."

(Reporting by Niluksi Koswanage; editing by Stuart Grudgings and Jonathan Thatcher)