Monday , November 30 2020

The new government of UPDATE 3 Malaysia has more budget and higher budget deficits



(He gives comments from Mahathir and Fitch)

Joseph Sipalan and Rozanna Latiff

Kuala Lumppur, Nov. 2 (Reuters) – Malaysia has announced an expanded budget on Friday and has set a budget deficit target of 2019, as the new government led by Mahathir Mohamad faced challenges that increase revenues in the slowing economy. debts.

The coalition government has won its budget for six months as it plans to cut public investment and increase revenues from privatization of infrastructure assets and dividends of approximately $ 30 billion ($ 7.20 billion) of the Petronas State Energy Company.

Mahathir warned on spending cuts, blaming the former administration of Najib Razak for having suffered more than 1 trillion of ringgit debt in the country.

His government also had to lose revenue from abolishing an unpopular tax on consumption.

"Though the budget is more than the previous year, you should remember that we are debating our debt to the former government," Mahathir told reporters after his Finance Minister presented the 2019 budget to parliament.

But Malaysia is now forecasting this year's budget deficit would be the highest five years, then it will have to worry about being able to avoid possible credit rating downgrade.

Sagarika Chandra, deputy director of the Fitch Ratings Asia-Pacific sovereign team, said the government "does not stick to a more conservative fiscal consolidation path, which is concerned about political credibility."

According to Finance Minister Lim Guan Eng, total revenue is expected to grow by 10.6 percent to 261.8 billion next year, largely due to the Petronas dividend.

Expenditures were planned for a budget of $ 314.6 billion ($ 75.53 billion), which is 8.3 percent higher than this year's budget, as the government recognized the items not included in the previous budget.

According to Mahathir, the government issues 200 billion yen samurai bonds in March at low interest rates to repay part of "expensive" loans from the previous administration. Several Japanese loans are possible, he said.

The government has left 2.8 percent of budget deficit this year, saying it will rise to 3.7 percent – the highest since 2013. The government of Najib has reduced its budget deficit by 2017 for eight years.

The budget deficit will be targeted at 3.4% in 2019, 2.8% in 2021 and 2% in the medium term.

The government said it would "dampen the fiscal consolidation path from the 2019 budget to a tight income base, additional budgetary resources and tax rebates".

ACCOUNTING MEASURES

According to an economic report published on a Friday, Malaysia said it significantly reduced public spending, despite the slower growth of the economy.

Lim and Mahathir blamed Najib for widespread shortages.

Najib is accused of multiple accusations of corruption, money laundering and abuse of power, especially the state-funded 1Malaysia Development Bhd.

The former leader refused the offense and accused his offspring of trying to escape his economic success. Najib introduced Mahathir's consumption tax to reduce its reliance on oil and gas revenues.

However, the new budget is increasingly dependent on Petronas, which Mahathir said could lead to higher government spending on higher oil prices.

Except for the special dividend, Petronas pays regular dividends of 24 billion ringgit. Dividends will only account for 20 percent of Malaysian revenue next year.

Most of Petronas' dividends are aimed at settling refundable refunds.

"The more difficult reliance on commodity revenue poses an additional risk to Malaysia's budget accounts, as there are no more structural revenue-generating measures," said Andrew Wood, analyst at S & P Global Ratings.

The government also sells non-essential state assets and land, privatizes infrastructure assets, reviews existing tax structures and incentives for companies to increase revenue prospects. It reviews several projects awarded by the previous administration. ($ 1 = 4,1640 ringgit) (Further Reports by Liz Lee and Emily Chow, Writing by A. Ananthalakshmi, Editing by Simon Cameron-Moore)

Standards:Thomson Reuters Trust Principles.

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