Malaysian has announced belt-tightening measures to cut liabilities over RM1 trillion (US$250 billion) that exploded under former prime minister Najib Razak.
The new finance minister, Lim Guan Eng, is confident the nation could “well maintain” the current budget deficit without further burdening the economy.
Lim said a series of cuts, a rise in oil prices and increased dividend contributions from state-linked firms are needed to allow the fiscal deficit to remain at 3 per cent.
Under an election promise, the 6-per-cent consumption goods and services tax (GST), is due to be axed this month.
Lim, 57, said the GST contributed around RM44.3 billion to national coffers last year but that sum would be offset by rising oil-related revenues, spending cuts on non-essential projects, increased dividends from government-linked firms and a new sales tax expected to be introduced in September.
“We are mindful that federal government debt, which has exceeded RM1 trillion, requires fiscal discipline,” Lim told the media.
Lim said the government’s projected fiscal deficit would rise marginally to RM40.1 billion this year from RM39.8 billion, which would maintain the budget deficit at 2.8 per cent of GDP.
The new finance chief said the current account balance, meaning government revenue after operating expenditure, would remain positive, and that there were no plans to alter economic growth forecasts.
He added that Malaysia has paid a RM143.8 million bond coupon payment of scandal-tainted 1MDB state fund.
“We have settled that… I have signed it very reluctantly, and the payment has been made,” said Lim.
The incoming government has said 1MDB was unable to repay its debts but the authorities would honour all commitments.
Malaysian investigators said they would work closely with their counterparts in Singapore over the scandal to gather evidence, track down witnesses and establish a 1MDB money trail.
At bilateral talks at the Malaysian Anti-Corruption Commission (MACC) headquarters in Putrajay between the 1MDB task force and Singaporean investigators this week, both sides reportedly discussed the best way to proceed with the probe and track down witnesses in Singapore.
“They will also work towards establishing a money trail to track down existing 1MDB funds and assets,” an official statement said.
Nine senior officers from Singaporean agencies, including the Attorney General’s Chambers, Commercial Affairs Department and Singaporean Financial Authority, attended the meeting in the Malaysian provincial capital.
Last week, the probe called up ex-PetroSaudi executive Xavier Andre Justo.
Malaysian docks need to stay busy. Picture credit: Wikimedia