PUTRAJAYA (May 22): Malaysia will experience short-term pain as the Pakatan Harapan works towards “cleaning up the Federal government finances”, said finance minister Lim Guan Eng.

Speaking to reporters at the Ministry of Finance here on his first day at work, Lim also echoed the sentiment shared by the Council of Eminent Persons chairman Tun Daim Zainuddin about Malaysia’s sovereign credit rating.

“What is important is that Malaysia’s current account remains in surplus and to clean up the mess left behind [by the previous government].

“There is some pain that we will go through on a temporary basis, but I think the investing public knows that once that is done, [the economy] can only grow stronger,” said Lim.

“In terms of sovereign rating, I agree that there is nothing to be concerned about at this juncture. For us to clean up the mess — I think it is good for Malaysia in the long term,” he added.

Daim was reported saying last Friday that he was not bothered by the possible downgrade of the country's credit rating, citing what happened in the US in 2007-2010 during the subprime mortgage crisis, despite the high credit rating it was given.

Lim, meanwhile, said earlier that the national debt has exceeded RM1 trillion following revelations from previously undisclosed accounts, the bulk of which is related to troubled strategic investment fund 1MDB.

The Pakatan Harapan coalition, which wrested power from Barisan Nasional on the promise of reforms, has pledged to abolish highway tolls, restructure tax schemes, and reintroduce the fuel subsidy — all of which would eat into the nation's coffers, according to analysts and credit rating agencies.

Lim said the new government "is looking at several options" to offset the impact those promised changes will create, but added that discussions are yet to be completed.

Nevertheless, Lim insisted that Malaysia’s economic fundamentals “are still strong”.

“Malaysia's financial and banking system remains robust and well-capitalised. In addition, non-performing loans (NPLs) constitute less than 1% of the total loans portfolio,” he said.

He expressed confidence that the nation’s fiscal position will remain healthy, as long as the related agencies can provide an accurate view of Malaysia’s “actual financial position”.

In a related matter, Lim reiterated that the sales and services tax (SST) can be reintroduced within this year.

“According to Pakatan Harapan’s manifesto, the SST rate is at 10%,” he said, but emphasised that an official rate will be confirmed when the tax scheme takes effect.