Finance Ministry: Government committed to strengthen financial position

PETALING JAYA: The Government is committed to strengthening the country’s financial position – with the Fiscal Transformation Programme (FTP) creating ample fiscal space for countercyclical measures that will help mitigate any adverse impact from external headwinds.

In a statement yesterday, the Finance Ministry said the FTP remained supportive of enhancing economic resilience and competitiveness, while ensuring the wellbeing of the rakyat and the quality of public service delivery.

“The Government remains com- mitted to fiscal consolidation towards a near-balanced budget in 2020.

“This is evidenced by consistent improvement of fiscal balance from a deficit of 6.7% of gross domestic product (GDP) in 2009 to 3% in 2017.”

In 2017, revenue increased 3.8% to RM220.4bil, attributed to better tax revenue collection in line with improved tax compliance, said MoF.

“The Government has also diversified its revenue sources and reduced its dependency on petroleum-related revenue which has reduced significantly from 41.3% of total revenue in 2009 to 15.7% in 2017.

“In addition, the Government has managed to contain the expenditure growth where total expenditure increased by 4.1% to RM262.6bil.”

Consequently, the Ministry said total expenditure as a share to GDP is on the declining trend from 20.5% in 2016 to 19.4% in 2017 - reflecting effort to enhance spending efficiency.

“The social sector which accounted for 38% of total expenditure remains the largest beneficiary of government allocation particularly in education, training and health sub-sectors.

“The public sector continued to complement the private sector activity in generating economic growth through development spending mainly on infrastructure projects which enhanced the productive capacity of the economy and inclusivity.”

The Ministry said the Federal Government continued to finance development expenditure through borrowings from domestic market.

“As at end 2017, the Federal Government debt stood at RM686.8bil or 50.8% of GDP, lower than the 55% self-imposed debt limit. Domestic debt remained the largest component of debt at 96.9% limiting the exposure from foreign exchange risks.”

Following the lower fiscal deficit target in 2018, the Ministry said the debt level is estimated to reduce further to about 50% of GDP by the end of 2018.

“Major rating agencies have reaffirmed Malaysia’s sovereign credit at investment grade of A- and A3, reflecting their recognition of the fiscal reform initiatives in strengthening the nation’s credit worthiness.”