'Fed govt deficit narrows to 4.7 pc this year'

The federal government's fiscal deficit is projected to narrow further to 4.7 per cent this year from 5.0 per cent of last year's gross domestic product (GDP), says Bank Negara Malaysia.

The central bank said the government would continue to strive for a balance between fiscal consolidation, with the need to support initiatives to transform the nation into a high-income economy.

In the medium term, the government would remain committed to fiscal consolidation, it said in the 2011 Annual Report released today.

Bank Negara said the government has outlined several key initiatives in the 2012 Budget to boost growth through private sector investments and consumption.

The government has also focused primarily on the implementation of transformation initiatives under the National Key Result Areas, National Key Economic Areas and Strategic Reform Initiatives, it said.

Among initiatives to accelerate investments are enhancement of existing public-private partnership initiatives and various tax incentives introduced to facilitate development of high-impact projects, it said.

In the meantime, the government also offers incentives to woo foreign investors and their participation in the economy through further liberalisation of the 17 sub-sectors, which allow 100 per cent foreign ownership, the bank said.

Competitiveness in the domestic service sector can be enhanced through this initiative, it said.

Besides the one-off RM500 financial aid to households with less than RM3,000 monthly income, the government has also introduced the SARA 1Malaysia Scheme to improve Malaysians' socio-economic well-being.

The government has also allocated RM33.3 billion in various forms of subsidies, incentives and assistance in anticipation of continued high global commodity prices and the impact on cost of living.

The report said revenue is expected to rise to RM186.9 billion, backed by better tax administration and higher tax collection.
The government has apportioned RM181.6 billion for operating expenditure and RM49.2 billion for development to support national growth.

Given the high domestic savings and the ample liquidity in the financial system, the government would continue to finance the fiscal deficit from domestic sources, primarily through issuances from the Malaysian Government Securities and Government Investment Issues, the central added. -- Bernama