According to minister, IMF is confident in Malaysia’s economic growth prospects having predicted the country’s GDP to grow by 5.75% this year
by SYAHMIE FAYYADH / Pic by BERNAMA
THE International Monetary Fund (IMF) has never stated that Malaysia is experiencing economic problems that lead to bankruptcy, says the finance minister.
Tengku Datuk Seri Zafrul Tengku Abdul Aziz (picture) said instead, that the IMF is confident in Malaysia’s economic growth prospects having predicted the country’s GDP to grow by 5.75% this year.
“If we compare the economic indicators of Malaysia and Sri Lanka, it is clear that our economy is much stronger than Sri Lanka’s. So, the chances for our country to be like Sri Lanka are very slim.
“Nevertheless, the government must continue to manage the country’s finances prudently and control the level of debt in terms of affordability,” Tengku Zafrul said in Dewan Rakyat yesterday.
“A country’s ability to increase its borrowing does not depend solely on its debt-to-GDP ratio; the most important factors are debt affordability and debt sustainability.”
He added that the tax-to-GDP ratio for Malaysia is around 11%, which is lower than other countries such as the Philippines at 18%, Thailand at 17.2% and Singapore at 13.3%. On average, the tax-to-GDP percentage ratio for OECD countries is over 33%.
“This means that although the country’s economy is recovering in 2022, the economic growth is not generating the additional revenue necessary to cover the increase in debt,” the minister said.
Commenting on the targeted subsidies mechanism, Tengku Zafrul said the government is still in the early stages of testing the mechanism before extensive testing.
He said the development and testing of a targeted subsidy system are expected to take between three and six months before it is fully ready for implementation nationwide.
In the implementation of targeted subsidies, the government will plan implementation in phases to ensure that it does not result in sudden inflation or affect the momentum of economic growth.
“In line with this approach, the government will not increase the price of petroleum directly to the market price without subsidies given its impact on inflation, even though the RON95 price of RM2.05 per litre is approximately 50% of the cost/price without subsidies.
“Thus, the government’s strategy is to ensure the implementation of replacing bulk subsidies with a combination of targeted subsidies and cash assistance in stages,” he said.