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Wednesday, April 2, 2014

Fiscal deficit ‘not a bad thing’ as country still growing, Najib says

Prime Minister Datuk Seri Najib Razak announces Budget 2014 in
Parliament in Kuala Lumpur, October 25, 2013. — Reuters pic
KUALA LUMPUR, April 1 — Malaysia’s fiscal deficit has not hindered the country’s growth, Prime Minister Datuk Seri Najib Razak said today as concern grows over the government’s mounting expenditure.

“It must be known that fiscal deficit is not a bad thing,” he told the Dewan Rakyat here during Question Time.

“The fiscal position of the country has been in the deficit since the 1990s and this has not stopped the country from continuing to grow,” added Najib, who is also finance minister, in reply to Jasin MP Datuk Ahmad Hamzah.

Putrajaya stepped up its subsidy rationalisation plan last year to trim public spending that had put its sovereign credit ratings at risk.

Ahmad wanted to know if the rationalisation plan would burden the people instead of stimulating the nation’s economy — as rising living costs have led to rumbles of discontent.

But Najib explained that the fiscal transformation programme undertaken by Putrajaya is a way to weather any financial crisis in the future.

Postponed prior to Election 2013, the so-called subsidy rationalisation programme was resumed after ratings firm Fitch slashed Malaysia’s sovereign debt outlook from “Stable” to “Negative” in July.

Putrajaya has since decided to increase fuel pump prices for the RON95 petrol and diesel; revised the electricity tariff; and announced the Goods and Services Tax (GST), which will come into effect in April 2015.

The price hikes, however, have caused public anger, which culminated in an anti-price hike rally attended by tens of thousands of Malaysians on New Year’s Eve.

The series of painful measures to trim Malaysia’s chronic budget deficit has hit Najib’s popularity hard, with the Merdeka Centre survey showing his approval sliding to a new low of 52 per cent in December.

Malaysia’s deficit last year was 3.9 per cent of the gross domestic product, down from 4.5 per cent in 2012. 

Putrajaya aims to reduce the budget gap to 3.5 per cent this year and to 3 per cent in 2015, before achieving a balanced budget by 2020.

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