KUALA LUMPUR (Oct 21): Malaysia's fiscal deficit is projected to fall to 3% of gross domestic product (GDP) in 2017, in line with previous official guidance.

"The government through various fiscal consolidation measures has successfully reduced the fiscal deficit from 6.7% of GDP in 2009 to 3.2% in 2015 and [it] is envisaged to be further reduced to 3.1% in 2016.

"We are committed to achieving a near balanced budget by 2020," Prime Minister Datuk Seri Najib Razak, who is also the Minister of Finance, said in the preface of Economic Report 2016/17 issued ahead of Oct 21's tabling of Budget 2017.

In absolute terms, the fiscal deficit amount eased from RM43.7 billion in 2009 to RM37.19 billion in 2015. However, the absolute fiscal deficit figure is expected to increase to RM38.73 billion in 2016 and RM40.34 billion in 2017, according to the Economic Report 2016/17.

In explaining its fiscal operations, the report said the government had to recalibrate Budget 2016 in January this year, when oil prices hit a low of US$26.39 (RM110.68) per barrel, to ensure its fiscal targets remain on track.

"The recalibration focused on optimisation and reprioritisation of operating and development expenditure to ensure that the government's financial position remains intact without impacting the growth target. Various revenue enhancement measures were also introduced to generate additional income to cushion the loss of revenue. These include optimising revenue from the redistribution and bidding process of telecommunications spectrum, enhancing foreign workers levy, relaxing the income tax penalty and reducing tax leakages at duty-free islands," the report read.

To strengthen the institutional capacity of fiscal management, the Fiscal Policy Committee, during its second meeting in May 2016, established the Fiscal Risk and Contingent Liability Technical Committee to evaluate the government's fiscal risks and contingent liabilities, and propose appropriate measures. The committee comprises representatives from the Ministry of Finance, Economic Planning Unit, Public Private Partnership Unit of the Prime Minister's Department and Bank Negara Malaysia.