Malaysia expected to tackle soaring debt in budget

Malaysia expected to tackle soaring debt in budget

KUALA LUMPUR - Malaysia is expected to introduce an unpopular consumption tax in its 2014 budget Friday along with other measures to address soaring debt that has raised the spectre of a credit downgrade.

Malaysia has one of Asia's highest debt-to-GDP ratios, its budget deficit swelling in recent years on massive populist spending by Prime Minister Najib Razak's coalition ahead of elections earlier this year in which it extended its 56 years in power.

"The government will do what is right for our economy. Some measures may not be popular now, but over the medium term, what is good for the economy is also good for the people," Najib said in a statement late Thursday.

Najib will table the budget at 4:00 pm (0800 GMT).

Ratings agency Fitch in July lowered the outlook for Southeast Asia's third-largest economy to "negative", over expected slower growth and rising debt.

Fitch also said Najib's weak election showing in May could crimp his plans to push economic reforms.

Top Malaysian officials have been forced to publicly refute fears of a national credit default, with Najib recently calling the risk "minimal".

Economists said markets were looking for concrete measures such as a Goods and Services Tax (GST) to reduce debt. The tax is expected to be implemented from 2015.

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