THE government is committed to improving the credibility of the fiscal policy conduct and framework through holistic reforms.
Proactive fiscal reforms are imperative for long-term fiscal sustainability, given the severity of the pandemic’s adverse impacts on countries with fragile economic fundamentals.
These reforms include revenue enhancement measures and subsidy rationalisation programmes to ensure fiscal sustainability and debt affordability. Overall, the government is responsible for ensuring an effective and efficient fiscal framework to enhance the credibility of fiscal policy while maintaining macroeconomic stability and safeguarding the wellbeing of the rakyat.
Under the Medium-Term Fiscal Framework (MTFF) 2023-2025, total revenue in the medium-term is projected at RM854.3bil or 14.7% of gross domestic product (GDP), mainly contributed to non-petroleum revenue which is estimated at RM699.5bil or 12% of GDP.
Petroleum-related revenue is forecast at RM154.8bil or 2.7% of GDP. The government will continue to improve revenue collection by enhancing revenue base, reducing leakages and exploring new sources of revenue guided by the Medium Term Revenue Strategy.
Meanwhile, on the expenditure side, the total indicative ceiling for the three years is estimated at RM1.1 trillion or 19.1% of GDP with operating expenditure (OE) allocation projected at RM842.8bil or 14.5% of GDP, while development expenditure (DE) at RM263.9bil or 4.5% of GDP.
Overall, the fiscal deficit is expected to consolidate at a gradual pace with the overall balance averaging at 4.4% of GDP for the MTFF period. The lower deficit will give flexibility for the government to regain fiscal room and provide counter-cyclical measures for future crises.
The fiscal policy in 2023 will continue to be agile, supporting the growth momentum towards achieving the national development agenda. The fiscal resources will be channelled through a more targeted approach and allocated in priority areas, particularly to enhance economic capacity and competitiveness.
The government’s budget remains expansionary to provide sufficient fiscal support in ensuring the rakyat’s well-being and undertaking economic reforms while continuing the fiscal consolidation plan.
The Federal Government’s revenue collection in 2023 is projected to be lower at RM272.6bil or 15% of GDP due to anticipated lower non-tax revenue collection.
The non-tax revenue is expected at RM67bil, declining 23% from 2022 due to lower dividends from government entities. But tax revenue remains the major contributor and is poised to grow by 3.7% to RM205.6bil, in line with the projected slower economic recovery.
