Malaysia’s government will seek parliamentary approval to raise funds for measures to support Covid-19 and increase the country’s legal debt ceiling, Finance Minister Tengku Zafrul Aziz told CNBC on Tuesday.
The new cabinet headed by Prime Minister Ismail Sabri Yaakob wants to add 45 billion Malaysian ringgit ($ 10.8 billion) to its Covid fund to help businesses and households, Zafrul said. This will increase the size of the fund to 110 billion ringgit, he added.
Along with the projected increase, the government will seek parliamentary approval to raise the debt ceiling from 60% to 65% of gross domestic product, the finance minister said.
We believe that, as the economy recovers, it is wrong to be too fast when it comes to getting support …
Tengku Zafrul Aziz
Minister of Finance of Malaysia
“We believe that as the economy recovers, it is wrong to be too quick to support … we must continue to support the economy as it recovers, which means we must continue to have a policy of fiscal expansion from 2022, “Zafrul told CNBC’s” Squawk Box Asia “
Since the beginning of the pandemic, the Malaysian government has deployed economic stimuli worth 530 billion ringgit ($ 127.7 billion).
Last year, Malaysia increased its debt ceiling from 55% to 60% of GDP as the country faced the economic downturn caused by the pandemic. It is the first time the Southeast Asian country has increased its debt ceiling since 2009 during the global financial crisis.
The government also raised the fiscal deficit forecasts for 2021 from 5.4% of GDP to 6.5% and 7%.
Zafrul, who plans to announce the government’s budget for 2022 on October 29, said he does not believe Malaysia is vulnerable to a downgrade of the credit rating.
“We have seen the reaffirmation even as the fiscal deficit widens,” the minister said. “What is important is Malaysia’s growth prospects and commitment (in the medium to long term) to fiscal consolidation, which is what we are still committed to.”
The top three credit rating agencies – S&P Global Ratings, Moody’s Investors Service and Fitch Ratings – have confirmed their ratings for Malaysia in recent months.
Reopening of Malaysia’s economy
Malaysia has been hit by its worst outbreak of coronavirus since the start of the pandemic, despite multiple rounds of blockade. The reported cases have remained above 10,000 a day since mid-July, while the death toll has exceeded 21,000 in total, according to data from the health ministry.
The government has intensified vaccinations. As of Monday, about 75% of adults (or 53.5% of the entire population) have been fully vaccinated, according to official data.
Zafrul said the government expects all adults to be vaccinated by the end of October. This will allow the country to reopen most economic sectors, he added.
Malaysia’s Minister of International Trade and Industry Mohamed Azmin Ali told CNBC last week that the country will begin treating Covid as an endemic disease at the end of next month as increases the vaccination rate.
The country’s central bank, Bank Negara Malaysia, last month lowered its forecast for 2021 economic growth by between 3% and 4%. Previously, its forecast was to grow between 6% and 7.5%.