Dr M: Zero GST won’t affect credit ratings

On the other, we have Tun Dr Mahathir Mohamad, a 92-year-old man who had been treated with the highest and also lowest of respect, and yet still have the alert presence and clear-mindedness to steer us through this historic and difficult transition period (Pic: TMRpic)

By P PREM KUMAR / Pic By TMR File

The country’s sovereign credit ratings will not be affected following the government’s decision to set a “zero rate” Goods and Services Tax (GST), as mitigating revenue stream has been identified, said Prime Minister Tun Dr Mahathir Mohamad.

He said the government will manage to save by cutting expenditure, curbing wastage, as well as securing higher revenue from the petroleum sector.

“The average estimates this year was US$52 (RM206.40) per barrel, but the average price currently is US$70 per barrel, we stand to profit from this,” he told a press conference in Petaling Jaya yesterday.

Dr Mahathir said the offsetting revenue mechanism had been taken into account when the government decided to lower the GST rate from 6% to a zero-rated tax.

He added that the fluctuations in oil prices, which would impact government revenue, had also been factored in when deciding to reintroduce the subsidies for petroleum.

“Of course what we have decided is that there will be no more changes or fluctuations in the value of petroleum, which has been changed every week.

“This is destructive to businesses, both the buyers and sellers, so now the price will remain static, but if we have to subsidise, then we will subsidise,” Dr Mahathir said.

International rating agencies — S&P Global Ratings, Moody’s Investors Service Inc and Fitch Ratings Inc — have stated that the zero-rated GST would constraint government income should there be no revenue-raising measures.

Asked on the gross domestic product (GDP) growth outlook for this year, Dr Mahathir said the government has no projection at present, as it is still reviewing the pertinent figures that would determine the real economic conditions.

“Regarding the figures and the country’s financial position, I realise that many of the figures are false.

“We need to determine to what extent they are not truthful (before making any projection),” he explained.

In March, Bank Negara Malaysia (BNM) raised its forecast for Malaysia’s economic growth this year to 5.5%-6% from its previous projection of 5%-5.5%.

Last month, the World Bank similarly lifted its GDP growth forecast for the country to 5.4% from 5.2% previously.

BNM yesterday announced that the GDP grew by 5.4% in the first quarter of the year.