Exclusive: Malaysia to double deficit to fund stimulus, says finance minister


By Krishna N. Das and Liz Lee

KUALA LUMPUR (Reuters) – Malaysia’s fiscal deficit will nearly double to around 6% of annual economic output this year because of the government’s recent efforts to revive the economy, the finance minister told Reuters, adding it could seek to raise the debt ceiling to finance the stimulus.

Southeast Asia’s third-biggest economy has announced incentives worth 295 billion ringgit ($ 69 billion) to soften the impact of the coronavirus pandemic, with the government vowing to directly inject 45 billion ringgit of that into the economy, mostly raised through domestic borrowings.

A direct fiscal injection of 10 billion ringgit announced on Friday will be raised through domestic borrowing, Tengku Zafrul Aziz said in an interview in his office on Saturday.

“There is only so much monetary policy can do,”

“So you need fiscal policy to come into play, as long as you have the discipline and the commitment in the longer term to go back to where you should be in terms of the deficit.”

Tengku Zafrul, who was chief executive of lender CIMB Group Holdings Bhd (KL:) before joining the three-month-old government, said the goal was to bring the fiscal deficit back to under 4% of gross domestic product (GDP) in the next three years or so. It was 3.2% last year.

“How bad was it during the (global financial crisis)? It was 6.7%. So we have room if we want to borrow,” he said, referring to the country’s peak annual deficit in 2009.

Tengku Zafrul said Malaysia’s public debt is now 52% of GDP but that “if we need to, then we should increase the ceiling” beyond the current 55% “to help the people and the economy”.

He declined to say how high the government might seek to raise the ceiling, a move that would require approval from parliament.

The 46-year-old said there was no immediate need for the central bank to cut its key interest rate further from its decade low of 2%, “given the liquidity in the country and given where the currency is going and where we are we as an economy”.

Bank Negara Malaysia’s monetary policy committee next meets on July 7, and some analysts have predicted another cut.

($ 1 = 4.2650 ringgit)

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Let’s block ads! (Why?)

Economy News

Leave a Reply

Your email address will not be published. Required fields are marked *