News Room - Business/Economics

Posted on 01 Oct 2009

Malaysia budget deficit no more than 4pc of GDP in 2015

Malaysia, facing its biggest budget deficit since 1987, is considering plans to cut development spending to RM180 billion in its next five-year plan for 2011-2015, a source with direct knowledge of the process said.

 

The spending plans under the 10th Malaysia plan compares with RM200 billion of spending set out in the current plan for 2006-2010, or the 9th Malaysia plan.

 

The proposal will enable the government to cut its budget deficit to no more than 4 per cent of gross domestic product in 2015. “The amount will enable the government current account (primary budget balance) to remain in surplus throughout the 10th Malaysia plan,” the source said.

 

The primary budget balances the government’s spending and revenues but excludes debt servicing costs and recent research from Citigroup calculates Malaysia’s sustainable medium-term primary deficit is 1.5 per cent of GDP, compared with the 1.7 per cent primary deficit it ran in the five years ended in 2008.

 

The planning unit’s proposals have been presented to the Malaysian cabinet as part of a series of five-year plans aimed at getting Malaysia to developed-nation status.

 

Malaysia has run a rising budget deficit since 2008 and the government forecasts that the deficit will be 7.6 per cent of GDP this year. The International Monetary Fund sees it at 7.1 per cent of GDP in 2010.

 

According to the planning unit’s proposals, the development spending aspect of the 10th Malaysia Plan would result in the deficit falling, although not at a rapid pace.

 

“Overall the (budget) deficit will not go over 4 per cent of GDP in 2015,” the source said.

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Overall debt service payments will be less than 15 percent of government revenues from 2011-2015, according to the report, and foreign debt will remain under 10 per cent of GDP.

 

A recent IMF report said foreign currency denominated debt is projected at 9.6 per cent of GDP this year.

 

As well as the RM180 billion development spend, the Economic Planning Unit has proposed Malaysia put RM15 billion into a private finance initiative.

 

“It is projected that this RM15 billion can generate private investments totalling RM50 billion through public private partnerships,” said the source.