By NUR HAZIQAH A MALEK / Pic By ISMAIL CHE RUS
Malaysia is on the right track to restore its fiscal position within three years, as evident by the latest testimony of at least three international rating agencies, namely Fitch Ratings Inc, Moody’s Investors Service Inc and S&P Global Ratings.
Finance Minister Lim Guan Eng (picture) said despite concerns about the government’s revenue base, especially with regard to the re-introduction of Sales and Services Tax (SST), improved tax collection strategies and continued economic growth will ensure the country readily meets its fiscal consolidation objectives.
He acknowledged that initially, these rating agencies were concerned about the government’s revenue base following the removal of the Goods and Services Tax (GST).
“The concerns are being addressed, as can be seen by the encouraging increase in direct tax collection last year, which rose by RM13.7 billion, or 11.1%, year-on-year to a record high of RM137 billion,” Lim said in a statement yesterday.
“Furthermore, the government collected RM5.4 billion in SST revenue for the last two months of 2018, which is 34% higher than the projected collection of RM4 billion,” he added.
“On top of that, the Tax Reform Committee (TRC) and Public Finance Committee (PFC) established last year will help the government diversify its revenue base and aid the fiscal consolidation exercise without placing too great a burden on the people, or hurting economic growth,” he said.
On Malaysia’s credit ratings, Fitch Ratings said in a report last November that Malaysia’s 2019 budget “sticks to a path of fiscal consolidation over the medium term”.
It expects that debt ratios will fall in the next few years, provided that GDP growth remains with the outlook for 4.9% growth in 2019 and 5% in 2020, and has reaffirmed Malaysia’s sovereign ratings at A-.
Moody’s stated that the country’s economic growth will stay stronger than its A-rated peers in the recent January 2019 annual update.
The rating agency maintained the credit ratings at A3 on Dec 7, 2018, on the back of Malaysia’s commendable growth, deep domestic capital market and solid institutional framework.
S&P Global stated that “the government’s commitment to gradual fiscal consolidation is credible and that one-off pressures such as funding of GST rebates should abate after 2019” and has maintained Malaysia’s credit rating at A-.