KUALA LUMPUR (BLOOMBERG) - Malaysia's finance minister Lim Guan Eng said the government won't raise taxes unnecessarily even as the trade war between two of its largest trading partners hampers the country's goal of achieving a balanced budget.

The government will spend within its means and won't add taxes just to fund certain infrastructure projects, Mr Lim said in a Bloomberg Television interview with Ms Haslinda Amin on Monday (Oct 14).

To raise funds, Malaysia will sell samurai bonds early next year, and continue its pursuit of assets lost in the 1Malaysia Development Berhad (1MDB) state investment-fund scandal, he said.

The government remains committed to reducing the fiscal deficit in the medium term, and could reach a balanced budget in five years if trade tensions between the United States and China are resolved, Mr Lim said.

The government widened its deficit target for 2020 to 3.2 per cent of gross domestic product, from a previous target of 3 per cent, to get the fiscal space it needs to support economic growth.

Last Friday, Mr Lim announced larger development spending for next year and offered a slew of incentives to win over investors amid the trade war, which he described as a unique opportunity for Malaysia to attract investment.

A special channel aims to make it easier for Chinese investors to enter the Malaysian market from next year. He expects foreign-direct investment from China to reach levels of investment from the US and Europe in coming years.

Soon after Prime Minister Mahathir Mohamad returned to power last year, Malaysia halted or cancelled major projects and slashed spending to rein in debt.

That tone has changed since Mr Lim said in February that he was nearly done cleaning house. The government raised next year's transport allocation by 8.8 per cent to fund a Kuala Lumpur mass rapid transit project and the Pan-Borneo Highway, while allocating RM10 billion (S$3.27 billion) to help Malaysians buy homes.

Malaysia will raise funds by selling yen-denominated bonds in the first quarter of next year, with the size to be determined after talks with Japan, Mr Lim said.

The government raised 200 billion yen (S$2.52 billion) this year at a coupon of 0.53 per cent, lower than the 0.65 per cent he indicated before the sale. Mr Lim said he's open to other types of bonds.

"It's always a pricing issue," he said. "We are willing to consider all issues provided the price is right."

REPARATION PAYMENTS

Tun Dr Mahathir has made it a mission to bring back money believed to be lost through 1MDB.

Mr Lim reiterated that he wants Goldman Sachs Group Inc to make "reparation payments" amounting to US$7.5 billion (S$10.26 billion) for the bank's role in arranging bond sales for the troubled state fund.

Until then, Malaysia will continue legal proceedings against the US bank and its 17 current and former directors, he said.

"I hope they back up their words with deeds," he said, referring to comments from Goldman president and chief operating officer John Waldron, who said last month that the bank wants to get the Malaysian people the money they deserve.

"If they want to make Malaysians happy, then back it up with reparation payments," Mr Lim added.