Subsidy restructuring likely to be announced during this year’s budget

KUALA LUMPUR: Malaysia’s subsidy restructuring framework will possibly is announced during the tabling of the 2024 Budget this year, said Deputy Finance Minister 1 Datuk Seri Ahmad Maslan.

“As you know, Malaysia is moving ahead with targeted subsidy reforms that are intended to save billions annually. Currently, the framework for the implementation of targeted subsidies is 75% complete,” he said in his speech at the Malaysian Institute of Accountants (MIA) international accountants conference 2023 today.

“One key challenge will be to formulate a foolproof and effective subsidy mechanism. Another is to plug weaknesses in the proposed subsidy mechanism to prevent leakages and corruption,” he added

To do this, Ahmad said the finance ministry would be studying global best practices and observe how developed countries tackle this issue.

“Fiscal policy must go hand-in-hand with our efforts to strengthen good financial management, put in cost reductions and plug leakages, and implement systemic and institutional reforms in order to strengthen our resilience, agility and resources to withstand crisis,” he said.

“Importantly, the Government must also do a better job of communicating with our stakeholders to enhance credibility, build confidence and trust with the business community and the people,” he added.

Meanwhile, he said managing the national debt which has crossed one trillion ringgit is a top priority for the government of today.

The annual debt to GDP ratio, including general government debt and contingent liabilities, is estimated to reach 109% in 2025 and 116% in 2026, up from 81% in 2022, he said.

He noted that the increasing debt-to-GDP ratio is driven by rising contingent liabilities, a declining federal government tax-to-GDP ratio since 2012, and rising federal government expenditures such as subsidies, emoluments, and development expenditures since 2017.

“Therefore, it is imperative for the Government to propose and implement expenditure reduction policies and revenue generation ideas by 2024 to better manage debt,” Ahmad said.