Malaysia to cut subsidies to manage ballooning debt
Malaysia will tackle its rising debt levels through subsidy reduction and good governance, instead of imposing new, broad-based consumption taxes, Prime Minister Anwar Ibrahim said in parliament on Tuesday.
The Southeast Asian nation’s debts and liabilities stand at about 1.5 trillion ringgit ($344 billion), or 82% of the gross domestic product, Anwar said in a reply to a question by another lawmaker. That includes 1MDB’s debt of 18.2 billion ringgit, he said.
“The steps we are taking to manage this, firstly, is to improve governance,” said Anwar. “Because some of the billion ringgit spending lost was because of weak management, leakages, which caused debts to be higher than the economy’s growth.”
Anwar said the government has no plans to reintroduce the goods and services tax, which was abolished by the Mahathir Mohamad administration in 2018. Instead, the government would continue to lower subsidies for the rich and review public spending without burdening the poor, Anwar said, pointing to the adjustments in electricity tariffs announced in December.
Malaysia, which runs Southeast Asia’s widest fiscal deficit after the Philippines, has seen its budget strained by the cost of keeping essentials at below-market prices. Government subsidies were forecast to reach a record 80 billion ringgit in 2022, with concessions on fuels and cooking gas alone projected to account for about half the amount.
The country’s revenue level remains low and trails comparative peers, according to the World Bank’s Malaysia Economic Monitor published Jan. 3. Government revenue is expected to resume its declining trend in 2023 on moderating crude oil prices, it added.
Anwar, who doubles as finance minister, is set to table the revised 2023 budget to parliament on Feb. 24 and has been preaching fiscal prudence as the Southeast Asian nation stares down still-elevated debt levels in the wake of a Covid-era spending drive.
