KUALA LUMPUR, Sept 2 — Datuk Seri Najib Razak vowed tonight to continue fiscal reforms, and reiterated his government’s commitment to stick to the country’s debt ceiling and deficit reduction target.
The prime minister told the crowd at The Edge Billion Ringgit Club Gala Dinner at the Hilton Hotel here that Southeast Asia’s third largest economy is on track to reach developed nation status by 2020, with the per capita Gross Domestic Product (GDP) increasing rapidly.
“From the government side, we will honour our commitment to secure the public finances, with fiscal reforms to secure Malaysia’s position.
“We will further rationalise subsidies, and this was underscored by the announcement I made earlier this evening, to broaden the revenue base and manage spending through the infrastructure pipeline.
“We will stick to both our debt ceiling and our budget deficit target, which is 3 per cent by the year 2015,” the prime minister said.
Malaysia’s fiscal deficit has already widened to RM14.9 billion and runs a relatively high government debt of 53 per cent of GDP in addition to one of Asia’s highest household debt levels.
Earlier in the evening, Najib announced the price hike for RON95 petrol and diesel by 20 sen from midnight, to RM2.10 for the former and RM2 for the latter.
Previously, the total fuel subsidy allocation for 2013 was recorded at RM24.8 billion.
The finance minister had also announced that the 1Malaysia People Aid (BR1M) will be raised from RM500 in Budget 2014 to better direct financial aid to the needy.
“But there are limits to how long the government can continue to be being the main engine of growth, and how far public consumption should be pushed given the current levels of household debts.
“In longer term, excessive household debt can become a national problem, reducing disposable income as interest payments soak up a greater share of people’s salaries.
“And although our underlying position is strong, with good growth, record foreign reserves, a growing proportion of domestically-financed debt and clear deficit reduction targets, we want and must ensure that our public finances remain in order,” Najib said.
He also said that the cumulative effect of businesses, investment, and ethics decisions will set the tone of the economy as a whole.
“With that in mind, I ask that you remain committed not just to maximising your returns on investment and equity, but also to work with us to building a more sustainable economy for Malaysia by investing in people as well as projects and taking business decisions befitting our long-term and short-term aims.
“The private sector will be the engine that drives Malaysia’s future growth,” Najib said.
Last year, global credit ratings agency Fitch Ratings had warned Putrajaya that its reliance on off-balance sheet funding could make Malaysia’s self-imposed 55 per cent debt ceiling meaningless.
Fitch also highlighted recently that government-guaranteed debt has jumped from nine per cent of GDP at end-2008 to 15.2 per cent by end-2012.
