Malaysia’s fiscal reforms set to lower federal debt ratio to 63.7pc by 2027, says Treasury sec-gen

Treasury secretary-general Tan Sri Johan Mahmood Merican said the reduction in the fiscal deficit reflects the government’s commitment to strengthen the country’s financial position, thereby helping to lower the ratio of the federal government’s debt to GDP. — Bernama pic

First Published: Thursday, 12 Nov 2026 7:00 PM MYT

KUALA LUMPUR, Nov 12 — The Madani government is committed to gradually reducing the fiscal deficit from 5.5 per cent of gross domestic product (GDP) in 2022 to 3.3 per cent in 2027. 

Treasury secretary-general Tan Sri Johan Mahmood Merican said the reduction in the fiscal deficit reflects the government’s commitment to strengthen the country’s financial position, thereby helping to lower the ratio of the federal government’s debt to GDP.

He said the ratio of the federal government’s debt to GDP, which was 65.2 per cent at the end of 2025, was projected to decrease to 64 per cent at the end of this year and further to 63.7 per cent in 2027. 

“This is part of the government’s efforts to carry out fiscal reforms to ensure that the level of debt is at the appropriate level,” he told reporters at Deloitte’s 52nd TaxMax conference here today.

He said the fiscal expansion policy in Budget 2027 is key to supporting economic growth, keeping the unemployment rate low, and increasing people’s income to help households deal with the cost-of-living challenge.

Commenting on the proposed re-implementation of the Goods and Services Tax (GST), he said the move may not be appropriate at this time, given economic uncertainty and the government’s priority to increase people’s income amid the cost-of-living challenge. 

He said the government still prioritises efforts to increase people’s income, including through a minimum wage increase.

Johan said the proposal to replace the Sales and Service Tax (SST) with GST at an equivalent rate would not necessarily increase government revenue, but rather potentially shift part of the tax burden from the business sector, including exporters, to consumers. 

“The Prime Minister has commented on the issue of GST and SST several times. Although GST may have its advantages, it may not be the right time at this juncture. 

“There may also be some misunderstandings or misinterpretations, which are not accurate, with some parties suggesting to implement GST to increase revenue. 

He said that those who propose introducing GST to increase the country’s revenue may need a higher GST rate, and that is not something the government wants at this time.

To date, Johan said SST collections stand at 3.2 per cent of GDP, the same ratio as GST collections in 2017. — Bernama