MALAYSIA must strengthen its fiscal position and reduce unnecessary government spending if it hopes to withstand future global economic and energy shocks without significantly increasing public debt, says Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani.
“As long as we continue to be in a fiscal deficit, any additional external shocks that require additional funds to reduce the impact on the economy for the people will force the government to increase its borrowing,” he tells Sunday Star.
Johari says efforts to bolster the country’s fiscal firepower must include a review of government expenditure across ministries.
“We need to re-evaluate and cut unnecessary expenditure in each ministry.”
His remarks come amid growing concern over Malaysia’s ability to shield businesses and consumers from prolonged disruptions stemming from conflict in the Middle East and volatility in global energy markets.
In April, Johari acknowledged that the government was studying targeted measures to soften the economic fallout from the conflict, but said the rapidly evolving situation made it difficult to formulate a perfect policy response.
He said conditions were changing almost every fortnight, requiring policymakers to remain flexible while focusing on sectors that directly affect the public.
Food security remains the government’s primary concern. Johari previously said Malaysia imports around RM100bil worth of food annually, leaving the country vulnerable to global price increases and supply disruptions.
Energy costs are another major challenge. While Malaysia is a net exporter of natural gas, Johari stresses that the benefits are limited because gas prices are tied to oil prices through long-term contracts and only reflect a fraction of prevailing crude oil prices.
He says that Malaysia remains a net importer of fuel overall, exposing the country to prolonged energy price shocks should tensions escalate along critical shipping routes.
For the business community, Johari says the government continues to explore measures to cushion the impact of rising logistics, insurance and production costs, although its options remain constrained as Putrajaya continues to service about RM1.3 trillion in debt and lacks the fiscal reserves available to some wealthier nations.
On long-term measures to address potential oil shocks and disruptions to key maritime routes such as the Strait of Hormuz, Johari says the matter falls primarily under agencies directly responsible for the energy sector.
However, he notes that the National Economic Action Council discusses strategies to address both current and future disruptions on a weekly basis.
