KUALA LUMPUR, Malaysia (AP) — Malaysia’s new government unveiled a record budget for 2019 on Friday despite battling a huge national debt, with new tax measures and increased dividends from national oil company Petronas intended…
KUALA LUMPUR, Malaysia (AP) — Malaysia’s new government unveiled a record budget for 2019 on Friday despite battling a huge national debt, with new tax measures and increased dividends from national oil company Petronas intended to plug the country’s fiscal deficit.
The budget, the first under Prime Minister Mahathir Mohamad since his alliance won May’s general election, forecasts that the fiscal deficit will widen to 3.7 percent of gross domestic product this year, up from 2.8 percent targeted by the previous administration. Economic growth is expected to slow to 4.8 percent from 5.9 percent in 2017.
Finance Minister Lim Guan Eng, presenting the budget in Parliament, said it will be a record 314.6 billion ringgit ($75.6 billion), up 8 percent from this year, to juggle the need for economic development while ensuring the wellbeing of the people, including cash assistance and subsidies for the poor.
“While we remove the fat, we must not cut our muscles,” he said.
Lim said the previous fiscal deficit target of 2.8 percent was unrealistic because a number of expenses were not reflected in the balance sheet. The government also faces a revenue shortfall after scrapping an unpopular consumption tax introduced by the previous government.
The country’s debt and liabilities stand at nearly 1.1 billion ringgit (264 billion), nearly 40 percent more than previously disclosed by the former government, in part due to a massive graft scandal at the 1MDB state investment fund, he said.
The 1MDB scandal has led to the ouster of former leader Najib Razak in the May 9 elections, ushering in the country’s first change of power since independence from Britain in 1957. Najib and his wife, Rosmah Mansor, have since been charged separately with multiple counts of corruption over the 1MDB saga and their trials are to start next year.
Lim said the government may have to pay up to 44 billion ringgit ($10.5 billion) more for 1MDB debts, not including 7 billion ringgit ($1.7 billion) in interest that was secretly paid by Najib’s administration using taxpayers’ money.
Lim said the government hopes to fix the fiscal woes in three years. He said the deficit is expected to narrow to 3.4 percent of GDP next year and 3 percent in 2020.
The government is also obtaining a soft loan of 200 billion yen ($1.8 billion) from Japan by March next year, he said.
The measures to bolster revenue in 2019 include a new excise duty on sugary drinks that will also curb obesity, an increasing levy on gains from property sales, an airfare levy and a real-estate investment trust for airports, and then selling part of the government’s stake in the trust to earn about 4 billion ringgit ($960 million).
Lim said Petronas will contribute 54 billion ringgit ($13 billion) to the government in 2019, including a 30 billion ringgit ($7.2 billion) one-off special dividend, but stressed that this won’t affect the state oil firm’s operation expenditures. Part of the money will be used to repay 35.4 billion ringgit ($8.5 billion) in tax refunds that were not paid by Najib’s government, he said.
“We were very careful about how the money is spent. Although the budget is more than the previous year, we are also carrying the burden, the debts we had to pay incurred by the previous government,” Mahathir told reporters later.