KUALA LUMPUR • Malaysia will devise new taxes soon to shore up the state Budget that has been constrained by debt and changes to the consumption levy, Prime Minister Mahathir Mohamad said yesterday.
The government may also have to sell assets to raise money to pay the "huge debt", he said at a forum in Kuala Lumpur as quoted by Bloomberg, adding that he believes foreign investment will still come and contribute to the nation's economic growth.
Tun Dr Mahathir said while Malaysia had survived the 1997/98 Asian financial crisis, its resilience has been reduced by the previous Barisan Nasional administration.
"Now the tiger is like a very small kitty," he was quoted as saying by Malaysiakini. "But I am sure that this country will grow and grow to become another tiger."
He was referring to Malaysia's past reputation as one of the newly industrialising Asian Tigers.
Finance Minister Lim Guan Eng said at the same forum that Malaysia will announce the new measures as part of his Budget speech on Nov 2.
The South-east Asian nation is grappling with debt and liabilities exceeding RM1 trillion (S$333 billion), worsened by state guarantees on debt papers issued by troubled fund 1Malaysia Development Berhad (1MDB).
Malaysia has also replaced the sweeping goods and services tax (GST) with a more selective levy called the sales and services tax, Bloomberg said.
Dr Mahathir has reviewed billion-dollar transportation projects, and cancelled or deferred many of them for being too costly.
The government on Sunday said it pared the cost of an almost US$14 billion (S$19.4 billion) mass-rapid transit project.
Mr Lim said that in the short term, it would be "foolish" for the current government, which took power in May, to abide by "unrealistic" fiscal targets set by the previous administration.
Budget consolidation will not be easy as Malaysia will need three years to resolve the issues resulting from 1MDB and billions of ringgit in possibly missing tax refunds, he said.
Malaysia is turning to additional bond issuance and sales of assets, including stakes in "non-critical, non-strategic companies", to raise funds to strive towards its fiscal deficit target of 2.8 per cent of gross domestic product this year, Mr Lim said in August.
One of those companies could be state oil firm Petronas, though Dr Mahathir has not come to a decision on whether to offer it through an initial public offering.
The government plans to reduce its direct equity holdings to reduce a "crowding-out effect" caused by state investments, Mr Lim said yesterday, as quoted by Bloomberg.
"Fiscal consolidation will not be achieved easily. We must be willing to expect some pain and even offer some sacrifice," he was quoted by Malaysiakini as saying.
"To quote our Prime Minister, 'The Budget is of sacrifice - everyone will have to sacrifice.'"