This article first appeared in The Edge Financial Daily on March 29, 2018

KUALA LUMPUR: Bank Negara Malaysia (BNM) expects the Malaysian government to narrow its fiscal deficit to 2.8% of gross domestic product (GDP) in 2018 from the estimated 3% deficit in 2017, on a higher growth in revenue.

BNM said in its 2017 annual report the 2018 forecast marks the ninth consecutive year of fiscal consolidation, which is a reflection of the government’s commitment towards fiscal reform. BNM said the government’s fiscal deficit reached a peak of 6.7% in 2009.

“Fiscal reforms over the past few years have ensured that the government maintained its fiscal position on a consolidation path. This was achieved through initiatives to optimise expenditures and enhance revenues. The moderation in growth of key operating expenditure items reflects the government’s efforts to rein in spending.

“The government also continued to diversify its sources of revenue through the introduction of new measures which include a spectrum auction, vehicle entry permits and a tourism tax. Measures to enhance tax compliance were further reinforced by the Collection Intelligence Arrangement (CIA) through integrated information sharing across the Inland Revenue Board, Royal Malaysian Customs Department and the Companies Commission of Malaysia,” BNM said.

BNM, quoting numbers from the finance ministry, said the government’s revenue is expected to rise to RM239.9 billion in 2018, from an estimated RM220.4 billion in 2017. BNM said the government’s 2018 total expenditure is anticipated to increase to RM280.3 billion from the estimated RM262.6 billion in 2017.