KUALA LUMPUR — March 30, 2018: The federal government’s debt level is expected to reduce further to about 50 per cent of gross domestic product (GDP) by the year’s end following the lower fiscal deficit target this year.
The Ministry of Finance (MoF) said that as at the end of last year, the debt stood at RM686.8 billion or 50.8 per cent of GDP, lower than the 55 per cent self-imposed debt limit.
Domestic debt remains the largest component of debt, at 96.9 per cent, limiting the exposure from foreign exchange risks.
The ministry said the government continued to finance development expenditure through borrowings from domestic market.
It noted that major rating agencies had reaffirmed Malaysia’s sovereign credit at investment grade of A- and A3, reflecting their recognition of the fiscal reform initiatives in strengthening the nation’s credit-worthiness.
The MoF said that last year, revenue increased 3.8 per cent to RM220.4 billion due to better tax revenue collection in line with improved tax compliance.
The government has also diversified its revenue sources and reduced its dependency on petroleum-related revenue, which has shrunk significantly from 41.3 per cent of total revenue in 2009 to 15.7 per cent in 2017.
In addition, the government managed to contain the expenditure growth, where total expenditure increased by 4.1 per cent to RM262.6 billion.
Consequently, total expenditure as a share to GDP is on the declining trend from 20.5 per cent in 2016 to 19.4 per cent in 2017, reflecting efforts to enhance spending efficiency.
The social sector, which accounts for 38 per cent of total expenditure, remains the largest beneficiary of government allocation, particularly in education, training and the health sub-sectors.
The MoF said that the public sector continues to complement the private sector activity in generating economic growth through development spending, mainly on infrastructure projects which enhanced the productive capacity of the economy and inclusivity.
“The fiscal policy remains supportive of enhancing economic resilience and competitiveness while ensuring the well-being of the people and the quality of public service delivery.
“The government remains committed to fiscal consolidation towards a near-balanced budget in 2020. This is evidenced by consistent improvement of fiscal balance from a deficit of 6.7 per cent of GDP in 2009 to 3.0 per cent last year.” — Bernama