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[KUALA LUMPUR] Malaysia is sticking to its target of reducing its budget deficit to 3.0 per cent of gross domestic product next year despite pressure from tumbling oil prices, the country's second finance minister said on Tuesday.
State oil company Petronas, which accounts for most of the government's revenue from oil and gas, warned last Friday that its various payments could fall by 37 per cent next year if oil stayed at around US$75 a barrel.
Fearing that would blow a big hole in next year's budget, which forecast oil prices would be around US$105, investors have dumped Malaysian shares and the ringgit, which suffered one of its worst drops since the 1997/98 Asian financial crisis.
But Ahmad Husni Hanadzlah said the deficit targets for 2014 and 2015 remain in place, pending a final decision on Petronas' payments to the government. "We have to look into the overall financial position in terms of the tax that we will receive from the petrol and gas industry," Ahmad told reporters. "They (Petronas) have not decided yet. Let the government decide how much they will pay," Husni said.
The government narrowed the deficit to 3.9 per cent of GDP in 2013 and aims to trim it further to 3.5 per cent this year and 3 per cent in 2015, with the goal of a balanced budget by 2020.