KUALA LUMPUR: Malaysia’s premier said yesterday his government would continue to make unpopular cuts to subsidies that have kept prices of key consumer items in check but which have helped fuel worryingly high levels of debt in Southeast Asia’s third-largest economy.
The lower subsidy outlays were contained in a budget tabled in parliament by Prime Minister Najib Razak that also forecast solid economic growth of between 5-6 percent this year and next.
After years of massive populist spending leading up to general elections last year, the task of corralling a growing debt has emerged as a top economic priority.
Subsidies have already been reduced on items including fuel and sugar, and the government plans to introduce a Goods and Services Tax (GST) from next April that it says will boost coffers by improving tax collection.
A Finance Ministry report submitted along with the budget said subsidy allocations would be reduced to 37.7bn ringgit ($11.6bn) in 2015, down 7.1 percent.
“Consolidating the fiscal deficit is a moral responsibility of our generation,” Najib, who also is finance minister, told parliament.
“We do not want future Malaysians to inherit a country burdened with government debt.”
Malaysia has one of Asia’s highest debt-to-GDP ratios, hovering just below a 55 percent red line that the government says will not be crossed. The finance ministry report said the ratio was at 52.8 percent in June, but gave no forecast for the year ahead.
Last year Fitch ratings agency warned Malaysia to get its house in order or face a possible sovereign-debt downgrade.
Malaysian consumers have come to expect the subsidy cushion, and reducing it has triggered public anger.
AFP
