It said the government’s ability to finance additional fiscal measures in the event of a prolonged pandemic was constrained by its statutory limits on federal government debts, including the requirement for the country’s operating expenditure to be financed by revenue, and not through borrowings.
The second option is for the government to raise additional non-tax revenue, such as higher investment income from Petronas and Khazanah, as well as sales of physical assets. “It remains unclear whether the government could convene an emergency sitting of Parliament to temporarily lift these laws during the crisis period.
The revenue shortfall is anticipated to be mainly due to lower petroleum-related revenue. It said the lower revenue, coupled with larger government spending - owing to economic stimulus measures - meant the fiscal deficit could widen to around 7% this year in the absence of any new revenue measures. Under its baseline scenario, The World Bank expects Malaysia’s real GDP growth to fall to -1% this year, before recovering to 6.4% and 4.8% in 2021 and 2022.