Malaysia to cut subsidies to manage ballooning debt: Anwar

MALAYSIA will tackle its rising debt levels through subsidy reduction and good governance, instead of imposing new, broad-based consumption taxes, said Prime Minister Anwar Ibrahim on Tuesday (Feb 14).

Anwar said the South-east Asian nation’s debts and liabilities stood at about RM1.5 trillion (S$459.2 billion), or 82 per cent of its gross domestic product. He added that the sum included 1MDB’s debt of RM18.2 billion.

The prime minister was speaking in parliament, in response to a question by another lawmaker.

“The steps we are taking to manage this, firstly, is to improve governance,” he said, “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 did not have plans to reintroduce the goods and services tax, which was abolished by the Mahathir Mohamad administration in 2018. Instead, he said, the government would continue to lower subsidies for the rich and review public spending without burdening the poor.

He pointed to the adjustments in electricity tariffs announced in December last year.

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Anwar, who doubles as finance minister, is set to table Malaysia’s revised 2023 budget to parliament on Feb 24. He has been preaching fiscal prudence as the country stares down still-elevated debt levels in the wake of a Covid-era spending drive.

With the second-widest fiscal deficit in South-east Asia, Malaysia has seen its budget strained by the cost of keeping essentials at below-market prices. Government subsidies were forecast to reach a record RM80 billion in 2022, with concessions on fuels and cooking gas alone projected to account for about half that amount.

The World Bank’s Malaysia Economic Monitor, published on Jan 3, showed that the country’s revenue level remained low and trailed comparative peers. The document predicted that government revenue would resume its declining trend in 2023 on moderating crude oil prices. BLOOMBERG