THE government will not reintroduce the Goods and Services Tax (GST) for the time being, as many Malaysians — particularly those in lower-income brackets — are still not financially equipped to absorb the added cost, Prime Minister Datuk Seri Anwar Ibrahim said on Friday.
Anwar, who also serves as Finance Minister, acknowledged that while GST is widely recognised as an efficient and transparent tax system, now is not the appropriate time to reimplement it.
“Although some might consider it a fair approach, many low-income earners would still be impacted despite certain exemptions,” he said during the Finance Ministry’s monthly assembly In Putrajaya today.
“Even if we exempt essentials like rice and sugar, these same people still have to spend on other goods and services, including transportation. GST affects every part of their daily lives,” he added.
Anwar emphasised that the government remains committed to fiscal responsibility but must balance revenue needs with the public’s capacity to cope with inflation and rising living costs. - June 20, 2025
Anwar said that the government has pushed back against claims circulating on social media suggesting poor economic management, rising debt, and burdensome tax and subsidy measures, insisting that its fiscal reforms are producing tangible outcomes.
“The MADANI administration’s reform agenda is achieving results, with both domestic indicators and international recognition reflecting its success.
“While some argue that these reforms are burdensome, in reality, targeted subsidies and progressive tax policies have been designed to safeguard the welfare of the majority,” he said.
Malaysia climbs 11 places in global competitiveness index
He explained that according to the 2025 World Competitiveness Ranking released by Switzerland’s IMD on 17 June, Malaysia now ranks 23rd globally, up 11 places from 2024 — the highest position recorded since 2020. The report highlighted improvements in economic performance (ranked 4th), government efficiency (25th), and business efficiency (32nd).
“These rankings reflect international confidence in our public sector reforms and sound economic policies,” said Anwar, adding that GDP growth reached 5.1 per cent in 2024, exceeding both the previous year’s performance and the 2024 Budget forecast of between 4 and 5 per cent. Growth for the first quarter of 2025 stood at 4.4 per cent.
Unemployment falls, Ringgit strengthens
Unemployment has declined steadily, reaching 3.0 per cent in April 2025 — the lowest level in a decade. Economic expansion and increased job creation have underpinned the positive trend.
The ringgit has also recorded strong gains. As of 18 June 2025, it was trading at RM4.2525 against the US dollar, marking a 5.2 per cent year-to-date appreciation and outperforming several regional currencies, including the Indonesian rupiah (+6.3 per cent), the Chinese renminbi (+3.6 per cent), and the Australian dollar (+0.6 per cent).
IMF praises Malaysia’s fiscal governance
The International Monetary Fund (IMF), in its 2025 Article IV report, commended Malaysia’s commitment to fiscal reform, notably through the Fiscal Responsibility Act 2023, which it described as a “cornerstone” of the country’s fiscal restructuring.
The government has gradually narrowed the budget deficit from 5.5 per cent of GDP in 2022 to 4.1 per cent in 2024 — below the projected 4.3 per cent — with a further reduction to 3.8 per cent expected in 2025. New federal debt issuances have also declined from approximately RM100 billion in 2022 to RM85 billion in 2024, with RM80 billion projected for 2025.
Subsidy rationalisation and tax reform to protect the majority
Anwar underscored that recent subsidy and tax reforms were designed to shield the most vulnerable Malaysians while curbing wasteful blanket subsidies.
In 2023, electricity subsidy rationalisation was implemented, with 85 per cent of households unaffected by any tariff increase. The resulting RM4 billion in savings was redirected to targeted assistance programmes.
In 2024, diesel subsidy reform was introduced in a way that preserved lower prices for the logistics sector, thereby containing downstream price pressures. As a result, inflation fell to 1.8 per cent in 2024 from 2.5 per cent the previous year.
He reiterated that forthcoming changes to the Sales and Services Tax (SST), effective 1 July 2025, will maintain exemptions for essential items. Analysts at Maybank forecast that the SST adjustment will raise the Consumer Price Index by only 0.25 per cent — a modest impact that is not expected to drive up inflation.
Greater fiscal space boosts public welfare and services
The government’s improved fiscal position has allowed for record allocations to direct cash aid programmes, including STR and SARA, which are set to benefit over 9 million recipients — equivalent to around 60 per cent of the adult population. Budget 2025 has allocated RM13 billion for these schemes.
Significant increases have also been made to health and education funding. The Ministry of Education’s allocation will rise to RM64 billion in 2025 (up from RM58 billion in 2024), while the Ministry of Health will receive RM45 billion (up from RM41 billion).
A challenging legacy and the need for reform
Anwar said by acknowledging the challenges inherited by the current administration, including a burdensome debt legacy, a narrow tax base, and the high cost of untargeted subsidies.
“This country has long struggled under a fiscally exhausting system — with massive debts from past excesses, and leakages that benefit the affluent and even foreigners,” he said.
“Global geopolitical turmoil is beyond our control, but reform is not. Since taking office, this government has embraced bold, necessary policies to restore fiscal discipline and improve the people’s quality of life.
“With teamwork, commitment, and shared understanding, I believe we can meet this responsibility with diligence and purpose,” he said. - June 20, 2025
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