KUALA LUMPUR, Nov 2 — The government will be prudent with its spending and there are measures in place to soften the impact of the deficit, Tun Dr Mahathir Mohamad said today.

The prime minister said this amid concerns of Malaysia being downgraded by credit rating agencies due to a higher deficit amount at 3.7 per cent of the GDP.

Commenting on Budget 2019 tabled by Finance Minister Lim Guan Eng, Dr Mahathir also said the government had no choice as it was carrying the burden of the previous Barisan Nasional (BN) administration.

"The deficit number is 3.7 per cent (of the GDP) but we can see throughout the (Budget 2019) speech by the finance minister, there were measures taken to correct the impact of that deficit.

"We were very careful about how the money is spent. Although the Budget is more than the previous year, we are also carrying the burden, the debts we had to pay incurred by the previous government,” he said during a press conference.

He also told the press that the soft loan taken from Japan will be used to offset some of the costlier loans taken prior to Pakatan Harapan rule.

The prime minister also pointed out that the interest rates from Japan is far lower when compared to the previous loan.

"The previous government borrowed money at the rate of 6 per cent. But for that 6 per cent rate, instead of getting 100 per cent of the money borrowed, we got only 90 per cent. So the interest rate was on 100 per cent but the rate went up to about 7 per cent.

"Now between 7 per cent and 0.65 per cent, I think you realise there’s a very considerable reduction. So if you are borrowing something that is carrying a very high interest rate and offered money at a low interest rate to pay off that loan, it means that the money you get is much cheaper,” he explained.