More subsidy cuts planned with 1MDB raising policy risk
(MMO) – Malaysia plans to cut more subsidies and move billions of dollars in government employee housing loans off its balance sheets to bolster its fiscal position, even as a growing scandal threatens Prime Minister Datuk Seri Najib Razak’s ability to implement potentially unpopular policies.
The government will gradually remove subsidies from petrol, liquefied petroleum gas and cooking oil in coming years, Mohd Irwan Serigar Abdullah, secretary general of Treasury, said in an interview late yesterday. A Fitch Ratings decision to pull back from downgrading Malaysia is giving the country space to reinforce its fiscal credentials, he said.
“This would help us to further strengthen and continue our effort despite all these noises, which I consider temporary,” Mohd Irwan said at his finance ministry office in Putrajaya, the administrative capital outside Kuala Lumpur, referring to the Fitch decision. “We are very committed in our fiscal consolidation.”
Malaysia has seen its efforts to improve the budget overshadowed by a debt pile-up at state investment firm 1Malaysia Development Bhd. and corruption allegations embroiling the prime minister. While Mohd Irwan reiterated the government’s assertion that 1MDB is sound and has enough assets to pay off its debt, scrutiny has increased over how much liability the government may have beyond its official borrowings.
