KUALA LUMPUR – It is high time for Malaysia to have a proper medium to long-term revenue strategy to restore its fiscal buffers, said the World Bank.
World Bank lead economist Apurva Sanghi said Malaysia’s revenue as a share of the gross domestic product (GDP) has been declining, with tax revenue being well below 12% of GDP.
“It is important to have a long-term fiscal view of what the Malaysian economy spending needs by sectors and, hence, how much more revenue needs to be mobilised. Right now, to the best of our knowledge, there is no target of the revenue that needs to be raised.
“Depending on the revenue gap between the current state of revenue and what needs to be raised, then you can talk about a mixture of optimal instruments (to raise revenue),” Apurva told reporters at the release of the October 2023 East Asia and Pacific Economic Update and part one of the September 2023 Malaysia Economic Monitor here today.
According to the World Bank, Malaysia’s economy is projected to moderate at 3.9% in 2023, with several key challenges persisting on the domestic front, including narrowing fiscal space, as government tax revenue keeps declining.
It said rigid expenditures on salaries, pensions, and interest payments continue to rise, exacerbated by various spending inefficiencies, including broad-based fuel subsidies and distortionary price controls.
The government has recently introduced its medium-term economic plan, the Madani Economy, which aims to reduce the fiscal deficit to 3.0% of GDP or below.
In October 2023, when presenting its Budget for 2024, the government is anticipated to reveal additional details about the subsidy reform plans.
In July, the government introduced its medium-term economic plan, the Madani Economy, which aims to reduce the fiscal deficit to 3.0% of GDP or below.
At the launch, Prime Minister Datuk Seri Anwar Ibrahim said the Madani Economy was proposed as a way to raise Malaysia’s standing by restructuring its economy to make it a leader in Southeast Asia, thereby raising the standards of the people’s living.
In October 2023, when presenting its Budget 2024, the government is anticipated to reveal additional details about the subsidy reform plans.
Apurva noted that managing expenditures was becoming an important task and a signal for the government to the people that it was plugging the leakages from the government coffers as much as possible.
“For example, expediting the government procurement act would be great because a lot of efficiencies happened through project procurements in Malaysia. But there are also many ways that you can manage expenditure efficiencies as well,” he added. – October 2, 2023