Finance Minister Lim Guan Eng speaks during a press conference at the Ministry of Finance in Putrajaya May 31, 2018. — Picture by Azinuddin Ghazali

KUALA LUMPUR, May 31 — Malaysia will be able to meet its budget deficit target for 2018 even though the scrapping of a goods and services tax will blow a RM21 billion hole in the government’s wallet, the finance minister said today.

Swept to a shock win in May 9 elections on pledges to tackle rising living costs and high-level corruption, the new coalition has set its sights on cutting an estimated RM1 trillion of debt it blames on abuses by scandal-tainted Datuk Seri Najib Razak’s previous administration.

First, however, tomorrow, it will fulfil a campaign promise to scrap a much-maligned GST introduced in 2015.

Finance Minister Lim Guan Eng said that the RM21 billion in lost revenue this year from the tax’s scrapping would be offset by rising oil-related income, spending cuts on non-essential projects, increased dividends from government-linked firms and a new sales tax expected to be introduced in September.

“We are mindful that federal government debt which has exceeded RM1 trillion, requires fiscal discipline,” Lim told a news conference.

Lim said the government’s projected fiscal deficit would increase slightly to RM40.1 billion in 2018 from RM39.8 billion, which would maintain the deficit at 2.8 per cent of GDP.

He said there were no plans to revise economic growth forecasts for now.

When asked about a possible public listing of state petroleum firm Petronas as an option for raising funds, Lim said this idea “has not been put forward to the government”.

Lim said higher dividends from government-linked entities such as Petronas, sovereign wealth fund Khazanah Nasional Berhad and the central bank could deliver an extra RM5 billion this year. That would be alongside RM5.4 billion of extra tax revenue from oil companies in Malaysia, and RM10 billion saved through reviews of high-priced projects.

A sales tax due to be introduced on September 1 will add an additional RM4 billion to the public purse this year, he said.

Reluctantly paid

On troubled state fund 1Malaysia Development Berhad (1MDB), Lim said the ministry “reluctantly” paid a RM143.75 million 1MDB bond coupon this week.

The new government has said the fund — set up nearly a decade ago — has been insolvent for more than a year. It has pledged to keep honouring all payments due on its debt.

Malaysia has also made it a priority to find out how billions went missing from 1MDB, and anti-graft agents have quizzed ex-premier Najib over his alleged role.

Najib has consistently denied any wrongdoing.

A task force investigating 1MDB said yesterday it is working with counterparts in Singapore to retrieve funds believed to have been misappropriated. — Reuters