Malaysia to double deficit to invest in stimulus, says finance minister
07 June, 2020
Malaysia aims to borrow its way out of an financial slump due to the coronavirus pandemic, and the finance minister told Reuters it'll almost double its fiscal deficit this season while keeping open the option of raising the general public debt ceiling.
Southeast Asia's third-biggest economy has announced incentives worth 295 billion ringgit (US$69 billion) to soften the impact of the coronavirus pandemic, with the federal government vowing to directly inject 45 billion ringgit of this into the economy, mostly raised through domestic borrowings.
Finance Minister Tengku Zafrul Aziz told Reuters the fiscal deficit would rise to around 6 per cent of annual financial output this year as a result of the stimulus, and a direct fiscal injection of 10 billion ringgit announced on Friday (Jun 5) would be raised through domestic borrowing.
"There is merely so much monetary policy can do," Tengku Zafrul said within an interview in his office. "And that means you need fiscal policy to enter into play, as long as you have the discipline and the commitment in the long run to go back to where you ought to be regarding the deficit."
Tengku Zafrul, who was simply chief executive of lender CIMB Group Holdings Bhd before joining the three-month-old government, said the target was to narrow the fiscal deficit back off to less than 4 % of gross domestic product (GDP) over another three years or so. It had been 3.2 per cent last year.
"How lousy was it through the (global financial meltdown)? It had been 6.7 per cent. So we've room if you want to borrow," he said, discussing the country's peak annual deficit in '09 2009.
The region's major economy, Indonesia, said last month that it expected its budget deficit to swell to 6.27 % because of virus-related stimulus.
Tengku Zafrul said Malaysia's outstanding public debt now stands at 52 % of GDP but that "if we have to, then we should raise the ceiling" beyond the current 55 per cent "to greatly help the people and the economy".
He declined to state how high the government might seek to improve the ceiling, a move that could require approval from parliament.
Neighbouring Thailand said in April its latest borrowing plans would increase its public debt to 51.84 per cent of GDP in today's fiscal year and 57.96 per cent within the next one.
Tengku Zafrul, 46, said there is no immediate dependence on the central bank to cut its benchmark interest further from its decade low of 2 %, "given the liquidity in the country and given where the currency is certainly going and where we are we as an economy".
Bank Negara Malaysia's monetary policy committee next meets on Jul 7, and some analysts have predicted another cut.
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