Malaysian finance minister Lim Guan Eng’s ‘belt-tightening’ plan for 1 trillion-ringgit debt
Heavy spending cuts, bigger dividends from GLCs and higher oil prices will all help in paring down debt, says new finance minister in first interview with foreign media as he rules out bigger deficit
The Malaysian government announced belt-tightening measures on Thursday afternoon to rapidly pare down total liabilities of 1.087 trillion ringgit (US$250 billion) that ballooned during the tenure of scandal-tainted premier Najib Razak and Finance Minister Lim Guan Eng is confident it can “well maintain” the current budget deficit without further burdening the economy.
In his first foreign media interview, Lim told the South China Morning Post a series of heavy expenditure cuts, a surge in oil prices and increased dividend contributions from government-linked firms are likely to allow the fiscal deficit to remain near the current 3 per cent rate.
This is despite the abolition in June of the country’s 6 per cent consumption tax – a key campaign pledge of the Pakatan Harapan coalition that ousted Najib’s long ruling Barisan Nasional alliance in the historic May 9 elections.
Lim said the fiscal gap following the abolition – the goods and services tax (GST) will be effectively zero-rated from Friday – will be around half of the 44.3 billion ringgit that the levy contributed to national coffers last year.
This would be mitigated by an expected increase of 5 billion ringgit in revenue from higher dividends from government-linked companies and a 5.4 billion ringgit increase in revenue from higher corporate tax revenue as a result of higher oil prices.
A sales and services tax (SST) slated to be implemented on September 1 is meanwhile expected to bring in 4 billion ringgit this year. On the expenditure side, the government expects to reduce costs by 10 billion ringgit through an “expenditure rationalisation exercise”.