Actions Taken and Possible Actions by The Government To Tackle This Problem

• Actions taken and possible actions by the Government to tackle this problem.
Based on the information provided, Malaysia’s national debts, including liabilities, has reached
RM1.5 trillion, which is more than 80% of the gross domestic product (GDP). This suggest there are
significant economic challenges that require urgent attention.
Fiscal Consolidation Measures
The action taken and possible action by the Government to tackle this problem. The first is fiscal
consolidation measures. The government may take approach to refinancing maturing debts with new
loans to replenish the government’s financial capacity to remain competitive was uploaded to the
parliamentary website. These measures include continuing to gradually adopt fiscal consolidation
measure to ensure that new loans are lower than during the epidemic without affecting the recovery of
the national economy. The Ministry will improve expenditure efficiency, control and ensure that
allocations are used effectively, and reduce leakage and waste.
The government will ensure debt service charge are manageable and do not exceed 15 per cent of
revenue, then to ensure that government loans are solely to finance development expenses that are
focused on high impact projects that provide return people in the long term. It will ensure government
borrowing are solely for financing development expenditure focusing on the high-impact projects and
providing provided long-term returns to the nation and to the people (Bernama,2023).
In addition, the medium-term revenue strategy proposed to support debt control and reduction
measures, as well as fiscal consolidation, involves several key initiatives. These include enhancing the
current taxation system for greater efficiency, broadening the revenue base to diversify income
sources, exploring untapped revenue from the informal sector through formalization efforts, and
prioritizing targeted tax incentives aimed at specific sectors or activities. By implementing these
measures, the strategy aims to strengthen government finances and ensure sustainable fiscal
management in the medium term. The government have increased the sales and services tax from 6%
to 8%, effective from 1 March 2024, across several sectors such as finance and leisure to increase
income.
Economic Stimulus
The government will also prioritize domestic lending, taking into account high liquidity and lower
loan costs, and without exposure to foreign exchange risks (Bernama,2023). Hence, through the Bank
Negara Malaysia, will ensure that there are no sharp or excessive movements in the value of the
ringgit to prevent disruption to the economy and to ensure that foreign exchange market conditions
remain orderly. Therefore, a flexible ringgit exchange rate plays an important role in buffering
external shocks without affecting domestic economic activities, especially amid the current
uncertainties in financial markets and global growth.
Furthermore, the government's efforts align with broader sustainability goals, as seen in the 12th
Malaysia Plan, which emphasizes the adoption of the circular economy and sustainable development
practices across various sectors. This plan not only addresses fiscal sustainability but also integrates
economic growth with environmental preservation and social development, aiming for a more
inclusive and sustainable future for Malaysia (UNDP, n.d.).
https://bernama.com/en/business/news_pemerkasa.php?id=2173454
https://www.freemalaysiatoday.com/category/highlight/2023/03/15/govt-unveils-strategies-to-control-
manage-national-debt-level/
https://www.mof.gov.my/portal/en/news/press-citations/fiscal-consolidation-measures-to-continue-
mof
https://www.undp.org/malaysia/blog/12th-malaysia-plan-advancing-sustainability
- Strengthening the institutional and legal framework, including the introduction of the Fiscal
Responsibility Act, to enhance governance, transparency, and accountability in fiscal
management.
- Implementing a medium-term revenue strategy to improve the taxation system and expand
the revenue base, including targeting the informal sector and refining tax incentives.
These actions underscore the government's commitment to prudent fiscal policies and
structural reforms aimed at reducing the debt burden while fostering economic growth and
ensuring social welfare. The Fiscal Responsibility Act, expected to be presented in the same
year, is particularly noteworthy as it signifies a move towards more stringent fiscal discipline
and accountability
https://www.freemalaysiatoday.com/category/highlight/2023/03/15/govt-unveils-strategies-to-
control-manage-national-debt-level/
https://www.nst.com.my/business/2023/01/870946/malaysias-national-debt-now-rm15-
trillion-or-over-80pct-gdp
https://www.nst.com.my/news/nation/2023/02/881110/malaysias-national-debt-passes-rm15-
trillion-mark-cause-alarm-warns
For more detailed information, you can refer to the sources:

- [FMT News on Government
Strategies](https://www.freemalaysiatoday.com/category/nation/2023/03/15/govt-unveils-
strategies-to-control-manage-national-debt-level/)
- [New Straits Times on National
Debt](https://www.nst.com.my/business/2023/01/870946/malaysias-national-debt-now-rm15-
trillion-or-over-80pct-gdp)
- [United Nations Development Programme on the 12th Malaysia
Plan](https://www.undp.org/malaysia/stories/12th-malaysia-plan-advancing-sustainability)

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Fiscal Consolidation Measures

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