Malaysia on track to cut debt-to-GDP to 60pct
Treasury secretary-general Datuk Johan Mahmood Merican said the country's fiscal consolidation efforts are bearing fruit, with the budget deficit narrowing from 5.5 per cent of gross domestic product (GDP) in 2022 to 4.1 per cent last year and further targeted to reach 3.8 per cent in 2025.
Concurrently, annual new borrowings have declined significantly, from RM99 billion in 2022 to RM77 billion in 2024, reflecting the government's commitment to long-term fiscal sustainability, Johan said in an interview with TV3.
"This shows that each year, the level of new debt is being lowered. This is consistent with the government's target to reduce the national debt level to 60 per cent of GDP.
"Currently, it stands at around 64 per cent, but the reduction in annual deficit and new borrowings will support the achievement of the 60 per cent target.
"So far, the government is on track, and what has been implemented is aligned with what was targeted under the fiscal responsibility legislation," he said.
He said certain parties may attempt to distort the narrative around the government's financial management, but international bodies such as the International Monetary Fund have acknowledged Malaysia's commitment to fiscal reforms, particularly through the implementation of the Fiscal Responsibility Act.
Prime Minister Anwar Ibrahim said the government has successfully lowered annual new borrowings, marking progress toward its commitment to more responsible fiscal management with only interest payments on existing debt yet to be reduced.
He said the decline in new debt aligns with the government's efforts to narrow the fiscal deficit, adding that the administration remains committed to reducing the deficit gradually and responsibly, without disrupting national development.
Anwar, who also serves as finance minister, said the government has deliberately taken a phased approach to ensure that deficit reduction does not compromise development priorities or undermine investor confidence.
Progressive tax reform protects rakyat.
Johan said the government's expansion of the Sales and Services Tax (SST) was part of a progressive and targeted tax approach, one designed to avoid overburdening the rakyat and support sustainable growth.
"If we were to reintroduce the Goods and Services Tax (GST) using the same parameters as SST, it would generate more than double the tax revenue. But this could be too heavy a burden on the economy," he said.
Instead, Johan said SST is structured to exempt essential items such as basic food and focus taxation on non-essential or premium goods.
"For example, service tax is applied to industrial buildings but not to residential homes. This ensures that those with higher purchasing power contribute more," he shared.
He added that additional revenue collected would go towards improving core public services. In 2025, welfare assistance under Sumbangan Tunai Rahmah (STR) will increase from RM10 billion to RM13 billion.
Meanwhile, allocations for education and healthcare have also been raised. The Education Ministry will receive RM74 billion, up from RM59 billion, and the Health Ministry RM45 billion, up from RM41 billion.
"These funds will be used to repair schools and clinics, fix road conditions, and upgrade basic infrastructure, ensuring the rakyat enjoys better quality of life through responsible and equitable fiscal measures," Johan said.
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