National debt to reduce if fiscal deficit slashed to 3.5pct of GDP - Rafizi

Success in lowering the fiscal deficit to the targeted 3.5 percent of gross domestic product by end-2025 will decrease national debt in the years that follow, said Economy Minister Rafizi Ramli.

He said if the level can be reduced as per target, it would assure foreign investors that the government has good fiscal discipline.

“With the national debt at RM1.5 trillion, missing the fiscal deficit target would not help in reducing the national debt or improving the country’s fiscal position.

“(But) if we continue to achieve the deficit target by 2025, we will start to see the debt falling,” he said in his speech at the 12th Malaysia Plan mid-term review engagement session with the Sabah government today.

Also present was Sabah Deputy Chief Minister III Shahelmey Yahya who represented Chief Minister Hajiji Noor.

Rafizi (above) said the federal government’s priority on strengthening the fiscal position is not just aimed at reducing debt but also reassuring international investors that the present government is disciplined and spends prudently.

He said that to manage spending, the approach taken with regard to the B40, M40, and T20 groups needs to be more accurate by measuring each household’s net disposable income to ensure the subsidies are targeted, as they require RM86 billion in annual expenditure.

“We have already implemented (targeted) electrical subsidies based on existing policies. The government is expected to save RM6 billion to RM8 billion a year on electricity subsidies,” he said, adding that diesel and RON95 subsidies will be the next area of focus.

Meanwhile, when met by reporters, Rafizi said the Finance Ministry will have to look at Sabah government’s proposal that unused development allocations from the federal government be channelled to a trust account that it manages.

He said the matter must be examined thoroughly as there are also many Treasury regulations set by the ministry to be looked at, including on whether the funds can be parked in a trust account.

“It must be examined thoroughly because the development funding matters come under an Act. Everything has to be finetuned by studying the existing Act,” he said.

Rafizi said the Sarawak government has raised the same matter and it will be discussed with Prime Minister Anwar Ibrahim.

On May 23, during the Sabah state assembly session, Hajiji reportedly said Sabah proposed that the federal government channel development allocations that are not used up by the end of the year into a trust account.

- Bernama