SUCCESS in lowering the fiscal deficit to the targeted 3.5% of gross domestic product by end-2025 will signal that the national debt will decrease in the years that follow, said Economy Minister Rafizi Ramli. 

He said if the level can be reduced as per target, it would assure foreign investors that the government has good fiscal discipline. 

“With the national debt at RM1.5 trillion, missing the fiscal deficit target would not help in reducing the national debt or improving the country’s fiscal position. 

“(But) if we continue to achieve the deficit target by 2025, we will start to see the debt falling,” he said in his speech at the 12th Malaysia Plan mid-term review engagement session with the Sabah government today. 

Rafizi said the federal government’s priority on strengthening the fiscal position was aimed at reducing debt and reassuring international investors that the present government is disciplined and spends prudently. 

He said to manage spending, the approach taken with regard to the B40, M40 and T20 groups needs to be more accurate by measuring each household’s net disposable income to ensure the subsidies are targeted, as they require RM86 billion in annual expenditure. 

“We have already implemented (targeted) electrical subsidies based on existing policies. The government is expected to save RM6 billion to RM8 billion a year on electricity subsidies,” he said, adding that diesel and RON95 subsidies will be the next area of focus. 

Rafizi said the Finance Ministry will have to look at the Sabah government’s proposal that unused development allocations from the federal government be channeled to a trust account that it manages. 

He said the matter must be examined thoroughly, and there are also many Treasury regulations set by the ministry to be looked at, including on whether the funds can be parked in a trust account.  

“It must be examined thoroughly because the development funding matters come under an Act. Everything has to be finetuned by studying the existing Act,” he said. 

Rafizi said the Sarawak government had raised the same issue, and it would be discussed with Prime Minister Anwar Ibrahim. 

On May 23, during the Sabah state assembly session, Hajiji reportedly said Sabah proposed that the federal government channel development allocations that were not used up by the year’s end into a trust account. – Bernama, June 27, 2023.