FINANCE Minister II Senator Datuk Seri Amir Hamzah Azizan said today that the MADANI Government inherited a significant national debt burden, which amounted to RM1 trillion by the end of 2022, reaching RM1.2 trillion ringgit or over 64% of GDP as of last year.
"If the Government continues to maintain a spending deficitt, the national debt will keep rising, " he explained.
Amir Hamzah said this in his address on the ongoing fiscal challenges and strategic measures during the tabling of the 2024 Additional Supply Bill and development budget proposals in the ministry’s winding up speech in the Dewan Rakyat today.
The minister emphasised that since the MADANI Government took office, its main commitment has been to gradually and consistently reduce the deficit rate, as follows:
- From 5.5 per cent in 2022;
- To 5 per cent in 2023;
- And, further achieving 4.1 per cent in 2024, which is better than the target set of 4.3 per cent.
He outlined that Malaysia has been running a fiscal deficit since 1998, borrowing each year to finance the development expenditure.
"We have never borrowed to cover operating expenses;rather, we borrow to ffinace the nation’s future development, with revenue generated sufficiently covering operational costs."
“Looking ahead, the government is committed to further reducing the fiscal deficit, aiming for 3.8% in 2025 and targeting a fiscal deficit of 3% by 2028,” he said.
He explained, the recent trend of reducing the amount of new borrowings reflects Malaysia's commitment to reducing its debt-to-GDP ratio to below 60 per cent and achieving a fiscal deficit of 3 per cent in the medium term, as outlined in the Public Finance and Fiscal Responsibility Act (FRA) 2023.
“Under Budget 2025, the government plans to reduce development expenditure to RM86 billion as part of efforts to lower the fiscal deficit.
“However, it will also implement public-private partnership (PPP) projects worth RM9 billion and ensure RM25 billion in direct investments from government-linked investment companies (GLICs).
Amir Hamzah explained, this strategy aims to boost public investment to RM120 billion in 2025, fostering economic growth despite a lower debt level.
In terms of reducing borrowings, the minister said, borrowing was almost RM100 billion in 2022, it dropped to RM92.6 billion in 2023, and it’s expected to reduce to around RM77 billion in 2024.
“This reduction in borrowing aligns with the government's goal to lower the debt-to-GDP ratio below 60% and achieve a fiscal deficit of 3% by 2028, he added.
Subsidies and Targeted Aid
In response to questions raised by lawmakers, Amir Hamzah said; “A key focus of the queries was on the government’s approach to subsidies, with various members raising concerns about the targeted fuel subsidy.
He noted the government allocated over RM70 billion for subsidies in 2024, surpassing the original budget estimate of RM58 billion.
The primary reason for this increase was the additional costs of fuel subsidies, particularly for RON95 petrol, diesel, and liquefied petroleum gas (LPG), he said, adding: "The government had initially planned to implement targeted subsidies for RON95 and diesel early in 2024, but the targeting for RON95 has been delayed until 2025."
On diesel subsidies, he said the government has place careful consideration of sectors such as agriculture.
"The agriculture sector is not neglected in the targeted diesel subsidy programme," he stated, highlighting the implementation of the Budi Madani initiative, which includes the MySubsidi Diesel Programme, both falling under the SKDS 2.0 system, ensuring that eligible transporters, farmers, and smallholders continue to benefit from subsidised diesel at RM2.15 per litre.”
He explained, the retail pump price, without subsidies, is now at RM3.18 per litre. The subsidy will be directed towards eligible sectors, such as logistics vehicles, using a fleet card system, allowing them to continue purchasing diesel at the subsidised price of RM2.15, which is more than one ringgit lower.
Additionally, individuals eligible under the Budi Madani programme are to receive cash aid of RM200 per month, adding up to RM2,400 annually.
The minister revealed that the government has provided over RM190 million in assistance under ‘BUDI Individu’ and RM70 million under ‘BUDI Agrokomoditi’ initiatives since the programmes's launch in June 2024. – March 3, 2025
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