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KUALA LUMPUR, July 1 ― Malaysia may have escaped a downgrade to its credit outlook by Fitch Ratings but this came at a RM15 billion cost to the public, a PKR lawmaker said today, pointing out that one of the reasons the agency cited for maintaining the country's rating was the newly-implemented Goods and Services Tax (GST).
Kelana Jaya MP Wong Chen pointed out that the government expects to collect some RM15 billion of additional tax annually from the GST, a consumption tax system that was rolled out on April 1.
“It is therefore the GST that has essentially saved the Umno-Barisan Nasional (BN) government from the threat of downgrade but at the full expense of the rakyat.
“The rakyat is made to cough up RM15 billion extra to pay the mountain of debts that the Umno-BN government created,” he said in a statement here.
Despite signalling a possible downgrade earlier this year, Fitch Ratings maintained Malaysia's credit ranking at the fourth-lowest investment grade after observing that the country's finances are improving.
In a statement Tuesday, the ratings agency said the outlook on the country's A- grade was revised from negative to stable, thanks to the GST and reforms on the fuel subsidy system here.
“Malaysia’s rating remains supported by reasonably strong real GDP growth rates and low inflation volatility,” Fitch said, according to a Bloomberg report today.
“Fitch views progress on the Goods and Services Tax and fuel subsidy reform as supportive of the fiscal finances. A further narrowing of the deficit is forecast in 2015 despite lower oil prices.”
Wong, however, said that end of the fuel subsidy however is not a government action per se, but a result of fall in the price of crude oil.
He said that unless Putrajaya takes serious measures to fight corruption and wastage, Malaysia's ratings will not likely improve.
“As such we will continue to monitor and combat corruption and wastage.
“Cases such as the recent MARA Australia property and the 1MDB international financial misadventures, remain the bane of the economy and overall governance of the nation,” he said, referring to recent controversies involving Bumiputera empowerment agency Majlis Amanah Rakyat (MARA) and the debt-laden 1Malaysia Development Berhad (1MDB).