This presentation was made by Mohammed Reezal Amad, Malaysia, at the 14th OECD-Asian Senior Budget Officials Meeting held in Bangkok, Thailand, on 13-14 December 2018

1. 1
14TH OECD-ASIAN SENIOR BUDGET
OFFICIALS ANNUAL MEETING
Bangkok, 13 – 14 December 2018
Mohammad Reezal Ahmad
Fiscal Policy Office
Ministry of Finance Malaysia
RECENT FISCAL POLICY &
BUDGETING DEVELOPMENTS IN
MALAYSIA

2. 2
Fiscal policy continues to focus on:
1) Ensuring economic stability and growth enhancing
2) Strengthening fiscal position in the medium and long term
(expenditure efficiency and broader tax base)
3) Reducing borrowings and liabilities
Fiscal philosophy is centred around transparency and efficiency reforms
 Undertake responsible and progressive fiscal reforms (Fiscal
Responsibility Act, Government Procurement Act)
 Enhance credibility, accountability and transparency
 Reduce fiscal deficit in a gradual and orderly manner
Malaysia’s Fiscal Policy

3. 3
(6.7)
(5.3)
(4.7)
(4.3)
(3.8)
(3.4) (3.2) (3.1) (3.0)
(3.7)
(3.4)
(4.7)
(3.4)
(2.7)
(2.3)
(1.7)
(1.3)
(1.1) (1.0) (0.8)
(1.6)
(1.2)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018R 2019B
Fiscal balance (% GDP) Primary balance (% GDP)
Strengthening public finances in ensuring gradual fiscal consolidation
RM bil 2017 2018R 2019B
Revenue 220.4 236.5 261.8
Operating expenditure 217.7 235.5 259.8
Current balance 2.7 1.0 2.0
Development expenditure 44.9 54.9 54.7
Less: Loan recoveries (1.9) (0.6) (0.7)
Overall balance (40.3) (53.3) (52.0)
% to GDP (3.0) (3.7) (3.4)
Consistently reducing deficit before the adjustment period
Strengthening public finances
Fiscal Rules
Rules Statutory Administrative
Borrowings are
only to finance
DE
Loan (Local) Act 1959
Current balance
always in
surplus to
ensure OE is
finance d by
revenue
Domestic debt
ceiling (MGS,
MGII, MITB)
Not exceeding 55% of
GDP
Loan (Local) Act 1959
and Government
Funding Act 1993 Self-imposed
limit of 55% of
GDPOffshore
borrowing ceiling
Not exceeding RM35 bil
External Loans Act 1963
Issuances of
conventional
Treasury Bills
Not exceeding RM10 bil
Treasury Bills (Local)
Act 1946
Limit of debt
service charges
Allocation for debt
service charges are
charged items and not
required to be tabled to
Parliament
Federal Constitution
Article 98 (1)(b)
Not more than
15% of revenue
or OE

4. 4
32.2 37.8 40.1 39.9 42.6 45.2 45.7 47.6 47.3 49.3 44.7
7.5
7.6 7.3 7.3 7.5 7.8
16.1
19.4 20.1
9.8
8.419.0
19.2 16.8 19.1 18.7 17.0
16.7
18.4 16.9
19.2
16.0
41.3 35.4 35.8 33.7 31.2 30.0
21.5
14.6 15.7 21.7
19.5
11.4
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018R 2019
Direct taxes (excl PITA) SST/GST Other non-oil revenue
Oil-related Special dividend
Diversified revenue and spending towards inclusive growth
Top Government Revenue in 2018R RM Bil % share
1 Companies Income Tax 70.5 29.8
2 Interest and Returns on
Investments
36.9 15.6
3 Individual Income Tax 34.8 14.7
4 GST/SST 23.1 9.8
5 Licenses and Permits 14.7 6.2
6 Excise Duties 10.7 4.5
TOTAL 190.7 80.6
Less dependent on oil-related revenues
Share of oil-related and non-oil revenue, % of total revenue
Non-oil
revenue
Oil-
related
Non-oil
revenue
Oil-
related
Main revenue contributor
Operating Expenditure by Economic Classification
% of total OE
29.2
15.2
7.1
3.2
0
10
20
30
40
50
60
2010 2012 2014 2016 2018R 2019B
Economic Social Security General Administration
RM bil
Economic sector remains priority in Development allocation
31.6
12.7
11.2
10.2
8.6
5.0
2.9
17.8
0
20
40
60
80
100
2010 2012 2014 2016 2018R 2019B
Others Grants and transfer to state governments
Grants to statutory bodies Subsidies & social assistance
Retirement charges Supplies & services
Debt service charges Emoluments

5. 5
50.8 49.6 50.0
52.7 54.5 52.7
50.7
51.1
0
10
20
30
40
50
60
0
100
200
300
400
500
600
700
800
900
1,000
2009 2010 2011 2014 2015 2016 2017 2018Q3
MGS MGII Other Domestic Debt Offshore borrowing Debt to GDP
Federal Government debt as percentage to GDP on a declining trend
(%)RM bil
Debt level remains below self-imposed debt ceiling
Self-imposed 55% to GDP ceiling
‘Others’ include individuals, non-financial corporations and unidentified sectors
Sources: Bank Negara Malaysia; FAST website; Bloomberg
Majority of non-residents are long-term investors Gross Borrowing by Instrument (2016 – 2018)

6. 6
Medium Term Fiscal Framework
CONFIDENTIAL
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
% GDP
Reset
consolidation
path
Initial
consolidation
path
The medium-term period of 2019 – 2021 is the transition period for fiscal adjustment
Medium Term Fiscal Framework (MTFF), 2019 – 2021
RM billion % of GDP
2019 – 2021* 2019 – 2021
Revenue 767.9 15.7
Non-petroleum 584.0 12.0
Petroleum -related 183.9 3.7
Operating expenditure 754.9 15.5
Current balance 13.0 0.2
Gross development expenditure 164.7 3.4
Less: Loan recovery 1.9 0.1
Net development expenditure 162.8 3.3
Overall balance -149.8 -3.1
Underlying assumptions:
• Real GDP growth (%) 4.5 – 5.5
• Nominal GDP growth (%) 6.8 – 8.2
• Crude oil price (USD per barrel) 60 – 70
• Oil production (barrels per day) 600,000
*Excluding new tax measures

7. 7
A- (Stable)
29 June 2018
 Our sovereign credit ratings on
Malaysia balance the country's strong
external position, monetary policy
flexibility, and track record of
supporting sustainable economic
growth, against its elevated
government debt stock, and evolving
fiscal policy settings.
 The stable outlook balances
Malaysia's strong net external
position, above-average growth
performance, and track record of
monetary flexibility against the risks
inherent in the ongoing political
transition and its sizeable government
debt stock.
A3 (Stable)
20 February 2018
 Malaysia's (A3 stable) credit profile is
supported by its large and diversified
economy, ample natural resources
and robust medium-term growth
prospects.
 The government's commitment to
fiscal consolidation is well-anchored,
supporting policy credibility and
effectiveness.
 Importantly, two-thirds of overall
government debt is held by domestic
investors that are large and long-term
investors, such as the Employees
Provident Fund, banks, and KWAP, the
civil servant pension fund. This
favorable debt profile reduces
rollover risks and limits the impact of
a potential currency depreciation on
debt-servicing costs.
Investment Grade Ratings Backed By Robust Economic Fundamentals
Source: Fitch Ratings; Moody’s Investors Service & Standard & Poor’s Global Ratings.
Malaysia’s solid credit profile is recognised by international rating agencies
A- (Stable)
24 September 2018
 Malaysia’s ‘A-’/Stable IDR reflects
strong GDP growth above that of peer
medians and a net external creditor
position, which are offset by high
government debt, and lower income
per capita and World Bank
governance scores versus peer
medians.
 Stronger GDP growth compared with
the historical peer median. Fitch
forecasts GDP growth at 5.3% for the
five years ending 2018, far above the
‘A’ median’s 4%.
 A net external creditor position of
around 17% of GDP, which is greater
than the historical ‘A’ median’s 8.3%
of GDP.

8. 8
2019 Budget Focus and Strategies

9. 9
WHERE IT COMES FROM WHERE IT GOES
Borrowings
and use of
Government'
s assets
16.8%
Non-tax
revenue
27.2%Indirect tax
13.1%
Other direct
tax
2.6%
Income tax
40.3%
RM314.6 bn
Emoluments
26.1%
Debt services
charges
10.5%Supplies and
services
9.2%
Retirement
charges
8.4%
Grants and
transfers to state
governments
2.4%
Subsidies & Soc.
Assistance
7.1%
Other expenditure
18.9%
Economic
9.3%
Social
4.8%
Security
2.3%
General
administration
1.0%
DEVELOPMENT EXPENDITURE
RM314.6 bn
Budget 2019: Channeling Resources Towards Productive Spending
OPERATING EXPENDITURE

10. 10
“A RESURGENT MALAYSIA, A DYNAMIC ECONOMY, A PROSPEROUS SOCIETY”
1 Implementing Institutional
Reforms
Fostering an Entrepreneurial
Economy
Ensuring People’s Wellbeing
FOCUS
i. Strengthening fiscal
administration
ii. Restructuring and
rationalising Government
debt
iii. Raising Government revenue
STRATEGY
iv. Ensuring welfare and quality
of life
v. Improving employment and
employability
vi. Enhancing quality of
healthcare and social welfare
protection
vii. Raising disposable income
viii. Improving education for a
better future
ix. Unleashing the new economy
power
x. Seizing opportunities in the
face of global challenges
xi. Redefining the role of
Government in business
xii. Ensuring equitable and
sustainable economic growth
2 3

11. THANK YOU
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