In line with the Public Finance and Fiscal Responsibility Act 2023, the government said it is committed to reducing its debt-to-gross domestic product (GDP) ratio to 60 per cent within five years from the current 64 percent to ensure a sustainable fiscal position, said Treasury secretary-general Datuk Johan Mahmood Merican.
He said the government has begun lowering annual net borrowing, from about RM100 billion in 2021 and 2022 to RM93 billion in 2023, and is aiming for just RM86 billion in 2024.
This is being achieved through fiscal consolidation, shrinking the annual fiscal deficit from 5.6 per cent of the GDP in 2022 to 5 per cent in 2023, and to 4.3 per cent in 2024, he said.
"Among efforts taken to lower the annual deficit include subsidy retargeting, removing direct negotiations for government projects in favour of tenders, and exercising greater prudence in expenditure such as in terms of overseas travel," he said on the sidelines of the National Tax Conference launch here yesterday.
Johan said the RM4 billion in annual savings from the diesel subsidy rationalisation, which was implemented June 10, will contribute towards reducing the government's annual borrowing requirement.
The Finance Ministry in a July 15 written reply on the Parliament website said that from January to April, government debt rose by RM50 billion to RM1.22 trillion, compared with RM1.17 trillion at the end of 2023.
Johan explained that the absolute value of debt will continue increasing as long as the government incurs a fiscal deficit, given the need to borrow to invest in essential development expenses such as building hospitals, schools, roads, basic infrastructure and public services.
"To achieve a more sustainable government debt level, we will continue to reduce the annual fiscal deficit, to ensure that total government borrowings do not grow faster than our economic growth, towards achieving the debt-to-GDP target of below 60 per cent," he said.
At the same event, Prime Minister Datuk Seri Anwar Ibrahim said the subsidy rationalisation is part of an initiative to decrease annual net borrowings to RM86 billion in 2024 from RM93 billion in 2023 and RM100 billion in 2022.
He said to achieve the lower annual borrowing requirement, the government must ensure prudent spending, avoid waste, and only borrow when necessary for development purposes that truly serve the needs of the people.
"Subsidy retargeting is key in the government's comprehensive fiscal reform efforts to reduce the annual borrowing.
"Other efforts include reducing wastage by tackling corruption, and implementing a more efficient manner of enforcing law and taxation efforts," said Anwar, who is also finance minister.