KUALA LUMPUR (Dec 23): If all goes according to plan, Prime Minister Datuk Seri Najib Razak, who is also the Minister of Finance, will confirm in a few weeks that Malaysia met its target of trimming its fiscal deficit to 3.2% of gross domestic product (GDP) in 2015, according to the Edge weekly in its latest edition.

The magazine’s Yen Ne Foo wrote that Najib’s ultimate aim is to reduce Malaysia’s fiscal deficit to 0.6% of GDP by 2020 but dragging an overspending government back to a balanced budget position looks to be a long and arduous journey.

The weekly reported that much credit goes to Najib for hitting the halfway point — reducing Malaysia’s fiscal deficit from 6.7% of GDP in 2009, when he took over the government’s finances, to 3.5% in 2014.

It said his strategy for driving government spending down was to slash broad-based and indiscriminate subsidies.

The sudden slump in global crude oil prices provided Malaysia the necessary impetus to restructure its energy and fuel subsidies, it said.

The Edge said RON 95 petrol was put on a managed float in 2014, the electricity tariff rate is now determined by an imbalance cost pass-through rebate mechanism and the gas tariff for industrial and commercial setups has been raised.

It said commuting costs soared after the government allowed an increase in rail fares and highway toll rates to cut the billions spent on compensation for concessionaires. State support for sugar has been scrapped and the RM950 million subsidy for cooking oil will suffer the same fate next year.

The magazine however added the cuts go even deeper. It said the government targeted reductions that would affect groups with little voice in politics and media. For instance, since January, the Ministry of Health has gradually removed subsidies on medical treatment fees for foreign nationals at public hospitals and clinics, it said.

It said some four million migrant workers at Malaysian factories, construction sites and plantations will be hard hit by the withdrawal. Meanwhile, the abolition of subsidy in November for Super Tempatan 15% broken rice, designed to ensure that the very poor can buy rice at the lowest price, will hurt this group the most.

The Edge said economists laud Najib for prescribing the bitter pill to restore some integrity to state finances, a bullet his predecessors were unwilling to bite.

For the full story on making the right cuts course going forward, read the latest edition of the Week edition for the week of Dec 23 – Jan 3 available at newsstands now.

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