KUALA LUMPUR, Dec 2 — The government could reverse decades of fiscal deficit by 2028 or 2029 if it commits to reforms that limit new borrowings and prudent spending, Prime Minister Datuk Seri Anwar Ibrahim told Parliament today.

The Tambun MP said his administration is on course to narrow the deficit after three years of back-to-back decrease since 2023. 

This year’s fiscal deficit is expected to be 3.8 per cent of GDP, 2 per cent less since he took office three years ago.

Total new borrowings stood at over RM100 billion in 2021, but declined to around RM75 billion four years later. 

“We can reduce the deficit more but states shouldn’t ask for more allocations then,” Anwar said, replying to a question by a government backbencher who accused the Opposition of attempts to polemicise government debt.

“We can reduce the deficit but it cannot be at the expense of crucial spending, like for flood mitigation projects. So if the fiscal deficit is narrowing, that means our debt burden is also declining,” he added.

“That is why we forecast that if things continue as it is, the deficit will plateau by 2027 or 2028. And if this continues, we are consistent, government debt would reduce significantly by 2028 or 2029.”

Total government debt stood at RM1.3 trillion as of September, or about 64 per cent of GDP, still below the statutory ceiling of 65 per cent of GDP, Anwar said. 

Offshore borrowings stood at just RM22 billion, below the statutory ceiling of 35 per cent.

1Malaysia Development Bhd (1MDB) debt remains the government's largest liability, at RM34 billion. 

This includes interest commitments of RM17 billion, bringing the total 1MDB debt to almost RM50 billion.

The amount paid by the government to date is RM42 billion, covering both principal and interest.