KUALA LUMPUR: In line with the Public Finance and Fiscal Responsibility Act, the government is committed to reducing its borrowings in terms of the debt-to-gross domestic product (GDP) ratio to 60 per cent within a five-year timeframe from the current 64 per cent to ensure a stronger and more sustainable fiscal position for the nation, said Treasury Secretary-General Datuk Johan Mahmood Merican.

He said the government has already started reducing the annual net borrowings gradually, from about RM100 billion for both 2021 and 2022 to RM93 billion in 2023, and is targeting RM86 billion in 2024.

This is being achieved through fiscal consolidation, reducing the annual fiscal deficit from 5.6 per cent of GDP in 2022 to 5.0 per cent in 2023 and thereafter 4.3 per cent in 2024, he said.

"Among the efforts taken to reduce the annual deficit include retargeting of subsidies, doing away with direct negotiations for government projects in favour of tenders, and exercising greater prudence in expenditure such as in terms of overseas travel," he told Bernama on the sidelines of the launch of the National Tax Conference 2024, here on Monday.

According to Johan, the RM4 billion annual savings from the rationalisation of diesel subsidy, which was implemented on June 10, 2024, will contribute towards reducing the government's annual borrowing requirement. 

The Ministry of Finance (MoF) stated in a written reply published on the Parliament website on July 15, 2024, that from January to April 2024, the government debt increased by RM50 billion to RM1.22 trillion as of the end of April 2024, compared to RM1.17 trillion as of the end of 2023.

Johan explained that the absolute value of debt will continue to increase as long as the government incurs a fiscal deficit, and the government continues to incur a deficit given the need to borrow to invest in essential development expenses such as building hospitals, schools, roads, basic infrastructure and public services.

"To achieve a more sustainable government debt level, we will continue to reduce the annual fiscal deficit, to ensure that total government borrowings do not grow faster than our economic growth, towards achieving the debt-to-GDP target of below 60 per cent," he said.

Johan also said the government will not reduce the annual fiscal deficit too sharply given the need to support national development, the infrastructure needs for the rakyat and support the momentum of economic growth.

At the same event, Prime Minister Datuk Seri Anwar Ibrahim said the rationalisation of subsidies is part of the government's initiative to decrease annual net borrowings to RM86 billion in 2024 from RM93 billion in 2023 and RM100 billion in 2022.

He said that to achieve the lower annual borrowing requirement, the government has to ensure prudent spending, avoid waste, and only borrow when necessary for development purposes that truly serve the needs of the rakyat.

"Retargeting of subsidies is a key component in the government's comprehensive fiscal reform efforts to reduce the government's annual borrowings.

"Other efforts include reducing wastage by tackling corruption, and implementing a more efficient manner of enforcing the law and taxation efforts," said Anwar, who is also the Finance Minister.