MALAYSIA’S fiscal deficit is expected to rise to 6% from an earlier estimate of 5.4% this year following the implementation of the Pemerkasa stimulus package announced by Prime Minister Muhyiddin Yassin yesterday. 

However, Finance Minister Tengku Zafrul Tengku Aziz emphasised that the country has the ability to reduce its fiscal deficit, adding that the ministry would continue to focus on its fiscal consolidation agenda.

He noted that the country recorded a fiscal deficit of 6.2% of the gross domestic product (GDP) in 2020.

“For now, I believe it is important to ensure that our economy continues to function during this health crisis,” he told a media briefing here today.

Tengku Zafrul said the RM11 billion allocated for the Pemerkasa initiative will be funded by domestic borrowings.

“We are also planning to issue a green sustainable sukuk to refinance our US dollar bond which is expiring in July. It is time to roll. Instead of refinancing in ringgit, this time we’re refinancing in US dollar,” he said, adding that the country’s total foreign debt is currently at less than 3%.

He also refuted allegations by former prime minister Najib Razak that the government had violated the law by raising the self-imposed statutory debt limit and making wrong fiscal projections.

Zafrul said the country’s statutory direct debt limit is expected to be at 58.5% of GDP, which is still below the statutory direct debt limit of 60%.

As at end-February 2021, the direct debt-to-GDP ratio is at 54% while total debt is at 57%. – Bernama, March 18, 2021.