KUALA LUMPUR (Oct 21): Despite Putrajaya's commitment to narrow its budget deficit for an eighth consecutive year to 3% of gross domestic product (GDP) in 2017, Moody's Investors Service expects the government debt to continue to climb.

"It remains unclear how the government's previously stated goal of a balanced budget by 2020 can be reached, especially given the absence of major reforms to increase revenue," said the rating agency’s vice president and senior credit officer Christian de Guzman.

At a projected 16.6% of GDP in 2017, de Guzman said federal government revenue will decline for a fifth consecutive year from a recent peak of 21.4% of GDP in 2012, he said.

"It will also be the lowest revenue since 2000," he added.

Nevertheless, de Guzman said fiscal consolidation has been enabled by the continued curtailment of expenditure, which has fallen faster than the decline in revenue.

The ratings agency said Budget 2017's focus on near-term fiscal consolidation supports its A3 rating for Malaysia.