The Malaysian government will seek parliamentary approval to increase funds for Covid-19 support measures and raise the country’s statutory debt ceiling, Finance Minister Tengku Zafrul Aziz told CNBC on Tuesday.
The new cabinet headed by Prime Minister Ismail Sabri Yaakob wants to add an additional 45 billion Malaysian ringgits ($ 10.8 billion) to its Covid fund to help businesses and households, Zafrul said. This will bring the size of the fund to 110 billion ringgit, he added.
Along with the planned 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 quick to attract support…” told CNBC’s “Squawk Box Asia”.
Since the start of the pandemic, the Malaysian government has rolled out economic stimulus measures worth 530 billion ringgits ($ 127.7 billion).
Malaysia last year raised its debt ceiling from 55% to 60% of GDP as the country grappled with the economic fallout caused by the pandemic. This is the first time the Southeast Asian country has increased its debt ceiling since 2009 during the global financial crisis.
The government has also raised its budget deficit forecast for 2021 from 5.4% of GDP to between 6.5% and 7%.
Zafrul, who is due to announce the government’s 2022 budget on October 29, said he does not believe Malaysia is vulnerable to a downgrade in its credit rating.
“We have seen the reaffirmation despite the rising budget deficit,” the minister said. “What is important are Malaysia’s growth prospects and the commitment – in the medium to long term – to fiscal consolidation, which is what we are still committed to.”
The three major credit rating agencies – S&P Global Ratings, Moody’s Investors Service and Fitch Ratings – have in recent months confirmed their ratings for Malaysia.
Reopening of the Malaysian economy
Malaysia has been hit by its worst coronavirus outbreak since the start of the pandemic, despite several rounds of lockdowns. Reported cases have remained above 10,000 per day since mid-July, while the death toll has exceeded 21,000 in total, according to data from the Ministry of Health.
The government has stepped up vaccinations. As of Monday, nearly 75% of adults – or about 53.5% of the entire population – had been fully immunized, official data showed.
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.
Malaysian Minister of International Trade and Industry Mohamed Azmin Ali told CNBC last week the country will start treating Covid as an endemic disease by the end of next month as the vaccination rate is increasing.
The country’s central bank, Bank Negara Malaysia, lowered its economic growth forecast for 2021 to 3% to 4% last month. Previously, he predicted growth of between 6% and 7.5%.