A citizen's roadmap to reducing Malaysia’s growing national debt

I REFER to the insightful articles in StarBiz on June 26 highlighting our healthcare sector's resilience, but more critically, reporting on the urgent warning from economists regarding Malaysia’s RM1.3 trillion national debt and the ever‑growing fuel subsidy bill ("Crucial to continue subsidy rationalisation").

As the experts rightly pointed out, continuing blanket subsidies is like having a giant leaky pipe in our national budget. While intended to help the poor, these subsidies tend to benefit the wealthy and foreigners the most. Imagine giving a discount to everyone at the grocery store when only a few families actually need the help. We are draining billions that could instead build schools, upgrade public hospitals, or pay down our massive debt.

If we do not fix this leak, we risk losing our "investment grade" rating. In plain language, that is like having a bad credit score. When Malaysia borrows money internationally, we pay interest. A lower rating means higher interest rates. That extra cost does not come from nowhere – it eventually pushes up the cost of living for every Malaysian family.

So what is a "shrewd" strategy that a layman like you and I can understand? I believe we need a three‑step house repair plan.

> First, fix the targeting. Instead of lowering petrol prices for everyone, the government should give targeted cash aid or e‑wallet credits directly to the B40 (lower income) and M40 (middle income) groups.

We already have databases like the Sumbangan Tunai Rahmah system. Use that. By doing this, the truly vulnerable are protected, while the wealthy and foreigners pay the actual market rate at the pump. This alone could save tens of billions annually without causing hardship.

> Second, lock the savings away. Here is where we need discipline. The government must legally promise that at least 60% of every ringgit saved from subsidy cuts goes directly into reducing our debt burden. This is not just about saving money; it is about building trust. International rating agencies want to see credible plans, not just empty promises. If we can show them a locked box marked "Debt Repayment", they will be far more confident in our economy.

> Third, introduce transparent monthly pricing. Surprises cause panic. No one likes waking up to a sudden hike at the petrol station. Instead, the government should announce a clear, predictable formula – like linking prices to global oil rates but with a temporary safety ceiling. Families and businesses can plan their budgets calmly. Transparency is key. As one expert noted, the market does not just watch for one‑off events; it watches for credible execution.

Now, let me lay out a bold but realistic target: instead of allowing our debt to reach the projected RM1.7 trillion by 2030, let us aim for RM1.5 trillion. That is a RM200bil improvement. Achieving this requires more than just fixing fuel subsidies – so here is my four‑pronged family budget plan to get us there.

> Prong 1: Fix the fuel subsidy leak (already discussed).

Over five years, savings from targeted subsidies could total roughly RM75bil. If we legally lock 60% of that – about RM45bil – directly into debt repayment, we have already made a strong start.

> Prong 2: Introduce a low, broad‑based consumption tax – a goods and services tax (GST) – at 3%.

I know taxes are unpopular, but hear me out. A small 3% GST, with essentials like rice, flour, and cooking oil zero‑rated, is fair. Those who spend more – the wealthy – pay more. Those who spend little pay almost nothing. Properly implemented, this could generate about RM20bil annually. Over five years, that is RM100bil. If we channel half of that – RM50bil – into debt reduction, we are halfway to our RM200bil target.

> Prong 3: Cut wasteful government spending and fight procurement leakage.

We all hear stories about overpriced projects and "leakages" in government contracts. If the government seriously cracks down on inefficiency – using digital tracking, open tenders, and strict audits – we could save an estimated RM6 billion annually. Over five years, that is RM30bil straight into our debt repayment fund.

> Prong 4: Monetise idle government assets.

The government owns vast tracts of land and old buildings that sit unused. Instead of letting them gather dust, lease them out or sell them strategically. A one‑time effort could raise RM25bil – think of it like clearing out your store room and selling unwanted furniture to pay off your credit card.

Add it all up:

> Fuel subsidy reform: RM45bil

> GST revenue (partial allocation): RM50bil

> Cutting wasteful spending: RM30bil

> Asset monetisation: RM25bil

> Total: RM150bil directly channelled to debt repayment.

But remember, we also borrow less each year because our deficit shrinks. That avoided borrowing adds roughly another RM50bil over five years. Combined, that gives us the RM200bil needed to bring our debt down from RM1.7 trillion to RM1.5 trillion by 2030.

What does RM1.5 trillion mean for ordinary Malaysians? With a growing economy (GDP projected at over RM2.5 trillion by 2030), our debt‑to‑GDP ratio would drop to about 56% – well below the internationally safe level of 60%. That gives us a comfortable buffer.

If a future crisis hits – another pandemic, a global recession, or an oil shock – we have room to borrow without panicking. Our credit rating improves, interest rates stay low, and the savings flow back to everyday Malaysians through cheaper loans and stable prices.

Some may argue that subsidy cuts or new taxes hurt the poor. But I counter that the current system already hurts the poor – because while they get a small discount at the pump, they suffer the most from the overall rising cost of goods caused by the weak ringgit and government debt burden.

Protecting the poor and stabilising our debt are not conflicting goals. We can do both with a phased, clear, and compassionate approach – giving direct cash transfers to those who truly need it, while asking the wealthy and corporations to contribute their fair share.

It is better to fix the roof while the sun is still shining than to wait for the storm to hit us squarely. Let us be brave enough to support these tough but necessary choices today, so our children do not have to carry an even heavier burden tomorrow.

PHILLIP M. RAJOO

Seremban