KUALA LUMPUR (Sept 18): The Malaysian government still has room to tap the “extra space” in the contingent liabilities to finance big-ticket projects, amid limited direct fiscal headroom, said BIMB Securities.

Contingent liabilities, as a proportion of economic output, stands at an estimated 17.0% and below the 25% cap under current law, BIMB Securities said in a note. With an eight percentage-points gap, the government could guarantee up to RM155 billion worth of project liabilities, the house noted.

“Moving forward, we foresee the government shift[ing] more towards [the] public-private partnership (PPP) model to finance big projects,” the house said.

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Malaysia has been trying to lower a long-running fiscal deficit that stretches back to the 1998 Asian Financial Crisis. This year, the government is targeting to narrow its budget gap as a proportion of gross domestic product (GDP) to 4.3%, from 5% last year.

The consolidation, however, comes at a time of mounting external risks for the export-dependent economy, putting pressure on the government to prop up public spending and spur private investments.

Earlier this month, the government unveiled the Public-Private Partnership Master Plan 2030, also known as Pikas 2030, which extends beyond public infrastructure to also include assets and services. There are at least 37 projects and 41 potential projects identified under Pikas 2030.

“We believe [that] Budget 2025 will announce more details of the ongoing projects,” BIMB Securities said. “As for potential projects, the details will be mentioned in the upcoming 13th Malaysia Plan and future fiscal policies.”

Projects such as the high-speed rail, Melaka International Aero-City Hub, and the Kuantan-Singapore Expressway are among key potential projects after 2025, “which we believe to have big impacts on the construction [sector], as well as [on] overall Malaysia’s GDP,” BIMB Securities added. 

https://www.theedgemarkets.com/node/727077