KUALA LUMPUR • The Malaysian government is set to unveil a larger budget for next year, with a rise in development expenditure and reduction in operational expenditure.

Second Finance Minister Ahmad Husni Hanadzlah said the increase in the budget was aimed at spurring the domestic economy in the light of the current global climate.

"There will be a slight increase in the budget to boost the domestic economy," he told reporters here after launching the Youth Housing Scheme yesterday. "(But) we will be adopting a prudent fiscal position to ensure efficient expenditure."

He said emphasis will also be placed on measures to alleviate the status of the B40 household group - the bottom 40 per cent of Malaysian households with incomes below RM2,500 (S$800).

He said Prime Minister Najib Razak will chair a budget meeting on Oct 7 to look at the issues highlighted by the respective ministries, noting that the government was targeting to reduce its fiscal deficit from 3.2 per cent to 3 per cent next year.

Revenue to fund the budget will be based on current global oil prices but would be flexible to allow for a review, he added.

Meanwhile, Datuk Seri Najib has warned Malaysia may miss a goal to balance its budget by 2020 as a commodity price plunge forces the government to cut its projections.

The budget shortfall may be "in the region" of 1 per cent of gross domestic product at the end of the decade compared with a current deficit of 3.2 per cent, the New Straits Times reported, citing Mr Najib's comments to fund managers and investors in New York.

Malaysia remains committed to achieving a balanced budget by 2020, he was quoted as saying.

Policymakers have been struggling to boost confidence in the economy and government finances since oil prices started slumping late last year.

THE STAR/ASIA NEWS/NETWORK, BLOOMBERG