[KUALA LUMPUR] Malaysia aims to borrow its way out of an economic slump brought on by the coronavirus pandemic, and the finance minister told Reuters it will nearly double its fiscal deficit this year while keeping open the option of raising the public debt ceiling.
South-east Asia's third-biggest economy has announced incentives worth RM295 billion to soften the impact of the coronavirus pandemic, with the government vowing to directly inject RM45 billion of that into the economy, mostly raised through domestic borrowings. Finance Minister Tengku Zafrul Aziz told Reuters the fiscal deficit would rise to around 6 per cent of annual economic output this year because of the stimulus, and that a direct fiscal injection of RM10 billion announced on Friday would be raised through domestic borrowing.
"There is only so much monetary policy can do," Tengku Zafrul said in an interview in his office."So you need fiscal policy to come into play, as long as you have the discipline and the commitment in the longer term to go back to where you should be in terms of the deficit." Tengku Zafrul, who was chief executive of lender CIMB Group before joining the three-month-old government, said the goal was to narrow the fiscal deficit back down to less than 4 per cent of gross domestic product over the next three years or so. It was 3.2 per cent last year.
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