Malaysia’s 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 led by Prime Minister Ismail Sabri Yaakob wants to add another 45 billion Malaysian ringgit ($10.8 billion) to its Covid fund to help businesses and households, said Zafrul. That will increase the size of the fund to 110 billion ringgit, he added.
Along with the planned increase, the government will seek approval from parliament to raise the debt ceiling from 60% to 65% of gross domestic product, said the finance minister.
We believe that as the economy recovers, it is wrong to be too quick in pulling support …
Tengku Zafrul Aziz
Malaysia’s Finance Minister
“We believe that as the economy recovers, it is wrong to be too quick in pulling support … we need to continue to support the economy as it recovers, which means we need to continue to have a fiscal expansionary policy going into 2022,” Zafrul told CNBC’s “Squawk Box Asia.”
Since the start of the pandemic, the Malaysian government has rolled out economic stimulus worth 530 billion ringgit ($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. That’s the first time the Southeast Asian country has increased its debt ceiling since 2009 during the global financial crisis.
The government also lifted its 2021 fiscal deficit forecast from 5.4% of GDP to between 6.5% and 7%.
Zafrul, who’s scheduled to announce the government’s budget for 2022 on Oct. 29, said he doesn’t believe Malaysia is vulnerable to a credit rating downgrade.
“We’ve seen the reaffirmation despite the fiscal deficit going up,” said the minister. “What is important is the growth prospects of Malaysia and the commitment — in the mid-term to long-term — to fiscal consolidation, which is what we are still committed to.”
All three major credit rating agencies — S&P Global Ratings, Moody’s Investors Service and Fitch Ratings — have in the past few months affirmed their ratings for Malaysia.
Malaysia has been hit with its worst coronavirus outbreak since the start of the pandemic, despite multiple rounds of lockdowns. Reported cases have remained above 10,000 a day since mid-July, while the death toll has surpassed 21,000 in total, data by the health ministry showed.
The government has ramped up vaccinations. As of Monday, close to 75% of adults — or around 53.5% of the entire population — has been fully vaccinated, official data showed.
Zafrul said the government expects all adults to be vaccinated by end-October. That will allow the country to reopen most economic sectors, he added.
Malaysia’s International Trade and Industry Minister Mohamed Azmin Ali told CNBC last week that the country will start treating Covid as an endemic disease by the end of next month as the vaccination rate increases.
The country’s central bank, Bank Negara Malaysia, last month downgraded its forecast for 2021 economic growth to between 3% and 4%. Previously, its forecast was for growth between 6% and 7.5%.