Spending cuts, new taxes likely for Malaysia in Mahathir government’s first budget

Finance minister Lim Guan Eng is expected to unveil a budget bordering on austerity after years of economic goodies from the previous administration

Government’s stance is that national debt stands at a debilitating 80.3 per cent of GDP

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How tight fisted will Malaysia’s finance minister Lim Guan Eng be in the country’s first budget under a new administration? Photo: Nora Tam

Published: 7:01pm, 1 Nov 2018Updated: 9:58pm, 1 Nov 2018

With a supposed 1 trillion ringgit (US$240 billion) national-debt albatross round his neck, Malaysia’s finance minister Lim Guan Eng has no qualms admitting he will be stingy in his inaugural budget to be unveiled on Friday. But just how tight fisted will he be?

Observers of Southeast Asia’s third-largest economy say they are bracing for a budget that borders on austerity – even as Lim and his senior finance ministry officials insist their cost-cutting measures are part of a “smart spending” strategy rather than Greece-style belt tightening.

The budget is the first since the defeat of former leader Najib Razak, who concurrently held the finance portfolio for nine years until the May 9 election.

Lim and his boss Prime Minister Mahathir Mohamad for months have disabused the public of expectations that the budget will be filled with economic goodies – a common trend during the Najib years.

Instead, the new administration has said the urgent need to pare down what it claims to be profligate borrowing by the scandal-tainted Najib means Malaysians must now brace for a “sacrificial budget”.

By conventional measures used by most countries, Malaysia’s federal government debt stood at 686.8 billion ringgit at the point of change of power on May 9 – amounting to some 50.8 per cent of gross domestic product and below a Najib-era pledge to keep the country’s debt below 55 per cent.