Government Committed To Gradually Reducing Fiscal Deficit – Treasury Sec-Gen
PUTRAJAYA, Oct 12 (Bernama) -- The government is committed to gradually reducing the fiscal deficit to three per cent in the medium term to ensure the country's financial position remains sustainable, with a target to reduce the deficit to 3.3 per cent of gross domestic product (GDP) by 2027.
Treasury secretary-general Tan Sri Johan Mahmood Merican said the target was set as the government expects economic growth to moderate slightly next year, partly due to global economic uncertainties.
He said this during a 90-minute briefing on current issues related to Budget 2027 organised by the Malaysian Information Department yesterday.
"For 2027, we expect there might be a slight moderation in GDP growth, which could be due in part to global economic uncertainty.
"However, we still project that unemployment will remain at a low level, but we might start seeing a slight increase in the inflation rate," he said.
Johan said that based on the macroeconomic situation, the government would continue to adopt a prudent fiscal policy, with a target fiscal deficit of 3.6 per cent this year before being reduced to 3.3 per cent in 2027 and three per cent in 2028.
The Federal Government's debt-to-GDP ratio is also targeted to gradually decrease from 65.2 per cent in 2025 to 64 per cent in 2026 and 63.7 per cent in 2027.
At the same time, he said Budget 2027 provides for an increase in Federal Government expenditure to RM459.8 billion, covering operating and development expenditure, compared with the original estimate of RM419.2 billion for Budget 2026.
Johan described the budget as an expansionary budget that allows the government to continue supporting economic growth and the well-being of the people.
He said that, taking into account investments by government-linked investment companies (GLICs), public-private partnerships, Federal Statutory Bodies and the Minister of Finance Incorporated (MoF Inc), total expenditure and investment under Budget 2027 amount to RM510 billion, compared with RM470 billion under Budget 2026.
"National fuel subsidies are expected to remain high at RM40 billion next year, as the government strives to balance the need to protect the people from the pressure of the cost of living with efforts to strengthen the fiscal position," he said, adding that government spending should continue to support economic growth and the well-being of the people, but must also be managed prudently.
Further commenting, Johan said the government could borrow to finance development expenditure, but operating expenditure needed to be funded through government revenue.
Regarding the impact of the strengthening ringgit on the prices of goods, he stressed that a stronger currency did not necessarily mean that the prices of imported goods would automatically fall.
He noted that factors such as market structure, competition, and operating costs also influence pricing.
Johan said that enforcement by the Ministry of Domestic Trade and Cost of Living, in addition to efforts to increase competition in the market, was important to ensure that consumers benefit from changes in costs and exchange rates.
He pointed out that the government is also looking into the need to simplify the import process in sectors with a limited number of players to encourage competition.
This approach is expected to help ensure that the benefits of the ringgit's strengthening are passed on to consumers, while the government continues its efforts to control the deficit and manage the country's expenditure responsibly.
The ringgit opened higher against the US dollar on Monday morning, supported by the government's commitment to fiscal discipline following the presentation of Budget 2027 last Friday.
At 8 am, the ringgit rose to 4.0820/0880 against the US dollar from 4.0830/0875 at last Friday’s close.
On Friday (Oct 9), the Prime Minister and Minister of Finance, Datuk Seri Anwar Ibrahim, tabled Budget 2027 themed ‘Reaching for the Sky, While Anchored On Our Values’ with a government allocation amounting to RM459.8 billion, alongside RM25 billion in investments from GLIC; RM11 billion in public-private investments; and RM14.2 billion in investments from Federal Statutory Bodies and the MoF Inc.
This brings the total allocation under Budget 2027 to RM510 billion, continuing the government’s expansionary fiscal policy.
The Fifth MADANI Budget aims to translate resilient economic growth into tangible benefits for the people through better wages, more efficient targeted support, stronger fiscal discipline, and accelerated efforts to develop higher-value industries.
-- BERNAMA