KL reviewing projects to ease strain on budget

KUALA LUMPUR - Malaysia will review planned public-sector projects in a move to improve the government's fiscal position and tackle a shrinking current-account surplus.

A fiscal-policy committee meeting on Monday will be chaired by Prime Minister Najib Razak and its decisions will be reflected in the 2014 budget to be announced in October, a government spokesman said.

"Projects that will have a big impact on public finances will be reviewed and sequenced properly to avoid excessive strain on the federal budget," Second Finance Minister Ahmad Husni Mohamad Hanadzlah was quoted as saying by The Star newspaper yesterday.

The minister added that public-sector projects with low import content and high multiplier effects will get priority, without compromising economic growth, the newspaper added.

Malaysia's annual growth rate picked up slightly to 4.3 per cent in the second quarter. It was bolstered by strong government spending before national elections in May and resilient domestic demand helped by large infrastructure projects under Datuk Seri Najib's Economic Transformation Programme.

But the trade-reliant country's current-account surplus fell sharply to RM2.6 billion (S$1 billion) in the second quarter, reflecting plunging exports and strong imports.

Local media has said the government is mulling over a 4 per cent goods and services tax to tackle its fiscal deficit. Such a move would reduce reliance on dividends from state oil company Petronas.

Malaysia's government debt is 53 per cent of gross domestic product.