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Malaysia will meet our projected budget deficit of 2.8% for 2018


The new Pakatan Harapan government is committed to deliver our key manifesto goals and promises to ease the burden of the rakyat who were suffering under decade-high inflation rates as well as to improve the standard of living for Malaysians.

To do so, we have already announced:

  1. Zero-rating GST on the 1 June 2018 and re-introducing the Sales and Services Tax (SST) on 1 September 2018. This will “return” approximately RM17 billion back to ordinary Malaysians for the rest of the year.
  2. The stabilization of the price of RON95 at RM2.20 per litre and diesel at RM2.18 per liter. This will save Malaysians RM3 billion .
  3. A RM700 million Hari Raya special assistance to civil servants (Grade 41 and below) and pensioners.


These 3 measures amounting to RM20.7 billion will provide a significant boost to consumer spending in Malaysia and lead to improved consumer optimism and business profits.

At the same time, we are mindful that Federal Government debt which has exceeded RM1 trillion, requires fiscal discipline to be maintained to ensure sustainable expenditure.

Here, I would like to commend the Treasury officials for working tirelessly round the clock, despite fasting in the month of Ramadan, to come up with real solutions for the Rakyat.

1. Rationalised Expenditure

As part of the reallocation of expenditure priorities, the new Federal Government will review, defer and renegotiate at least RM10 billion worth of identified high-priced projects. These include:

  1. Projects were awarded via direct negotiation or a limited tender exercise, some of which can be revoked. For example, a RM350 million contract that was awarded to carry out renovation and rehabilitation of Sultan Abdul Samad Building in Kuala Lumpur
  2. Perbelanjaan operasi kurang penting termasuk perkhidmatan professsional, konsultansi, pengurusan acara, aktiviti promosi dan sesetengah perkhidmatan naiktaraf sistem ICT.
  3. Non-essential operating expenditure include professional and consulting services, refurbishments, events and promotional activities, and selected ICT systems upgrading.
  4. Certain big-ticket budget allocations for mega projects such as MyHSR and MRT3.
  5. Other expenditure items such as special projects under the Internal Coordination Unit (ICU), capital injections to various funds, transfers to the authorities of the various development corridors1 and projects paid for under the facilitation fund.


In the longer term, the government would save billions of ringgit when these projects were to be re-tendered or scrapped altogether.

2. Optimised Revenue

In addition to rationalising Federal Government expenditure, the Ministry will achieve additional revenue from:

  1. An estimated RM5.4 billion from the rise in the price of oil from the USD$52 per barrel used in the 2018 budget to the current price of USD$70 per barrel. This additional revenue will come from the additional corporate and petroleum income taxes from the oil companies operating in Malaysia.
  2. An estimated RM5 billion as a result of higher dividends from Government Linked Companies (GLCs) such as Khazanah, Bank Negara Malaysia (BNM) and Petronas.
  3. An estimated RM4 billion from the implementation of the SST in September. This conservative estimate is due to act that the SST revenues will only be fully realized from November onwards, taking into account the bi-monthly tax collection mechanism for local manufacturers.


Overall, the estimated impact and mitigation measures to maintain the deficit level are summarized in Table 1 below:

Table 1: Preserving Fiscal Discipline for 2018

Revenue Impact
Item Value (RM billion)
Zero-rating GST (21.0)
Increase in corporate taxes due to the rise in global oil prices 5.4
Higher dividends from GLCs 5.0
Proceeds from SST 4.0
Net Revenue Impact (6.6)
Expenditure Impact
Hari Raya Special Assistance (0.7)
Petrol price stabilization program (3.0)
Expenditure Rationalisation Exercise 10.0
Net Expenditure Impact 6.3
Nett effect on the overall budgeti (0.3)

In other words, the projected fiscal deficit will increase from RM39.8 billion to RM40.1 billion, which would maintain the Federal Government budget deficit at 2.8% of the GDP. In addition, the Government’s current balance (government revenue less operating expenditure) will also remain positive.

Sayangi Malaysiaku!


YB Lim Guan Eng
Menteri Kewangan
31 Mei 2018

i The numbers will be finalized when the 2019 budget is November 2018.
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