MADANI government fiscal consolidation on the right track

Malaysia's economy grew by 4.4 percent in the first quarter of 2025, supported by among others, the tourism industry. – File photo
KOTA KINABALU: The strong fiscal performance of the MADANI Government indicates that Malaysia's fiscal consolidation efforts are on the right track despite ongoing global economic challenges.
Institute for Development Studies Sabah (IDS) Chief Executive Officer Datuk Dr Ramzah Dambul said the national fiscal deficit was successfully reduced by 17 percent to RM21.9 billion in the first quarter of 2025, compared to RM26.4 billion in the same period last year.
In addition,government revenue rose by three per cent to RM72.1 billion in the first quarter of 2025, driven by the collection of sales and service tax (SST) and individual income tax, he said.
He added that a 2.5 per cent reduction in expenditure to RM94.2 billion – achieved through subsidy rationalisation and savings from lower global oil prices – also contributed to the improved fiscal performance.
'This reflects the success of the tax base expansion strategies and revenue reforms implemented through the MADANI Budget.'
'Moreover, the government plans to introduce capital gains tax and luxury goods tax as new sources of revenue without burdening the people.'
'Discipline in expenditure management is also evident, including through the restructuring of diesel subsidies, which has significantly reduced costs without compromising the welfare of low-income groups.
'Targeted aid initiatives such as the Rahmah Cash Contribution (STR), Basic Rahmah Aid (SARA), and rice seed subsidies are maintained,' he said.
'Spending efficiency has also been improved by optimising grants to statutory bodies,' he said.
Datuk Dr Ramzah Dambul
Ramzah, who is also an economic researcher, said the enactment of the Public Finance and Fiscal Responsibility Act 2023 sets a target to reduce the fiscal deficit to 3.8 per cent of Gross Domestic Product (GDP) by 2025 and to three per cent by 2028.
Similar efforts are also being implemented at the state level, such as the Sabah Government's move to introduce taxes on silica sand and palm biomass products starting in April 2024, he said.
'This proves that governments at all levels are applying strong and disciplined strategies to strengthen revenue and fiscal sustainability.
'This performance also reflects fiscal discipline and the effectiveness of the government's economic reforms, with the 2024 deficit reduced to 4.1 percent of GDP – surpassing the 4.3 percent target – and a commitment to further lower it to 3.8 percent in 2025 under the Act.
'This clearly shows the government's ongoing efforts to strengthen the country's fiscal sustainability,' he said, adding that Malaysia's economic strengthening efforts are in line with its latest fiscal achievements.
Ramzah, who is also former Deputy Vice-Chancellor (Research and Innovation) of Universiti Malaysia Sabah (UMS), said Malaysia recorded its highest-ever approved investments in 2024, amounting to RM378.5 billion – a 14.9 percent increase from the previous year – spanning over 6,700 projects and creating 207,000 job opportunities.
As such, he said this reflects investor confidence in stable and business-friendly economic policies.
He added that the economy grew by 4.4 percent in the first quarter of 2025, supported by household spending, a strong labour market, private investment, and increased exports – especially in the electrical and electronics (E&E) and tourism sectors.
He also noted that government efforts to stimulate growth, including strategic industry incentives and skills upgrading programmes, have contributed to this momentum.
'However, the government remains aware that external risks such as trade tensions can have an impact.'
'Hence, efforts to diversify sources of growth, improve productivity, expand export markets, and enhance spending efficiency, and the tax base must continue to be strengthened proactively,' he said.
Ramzah also refuted claims that the country's economy is deteriorating, saying they are inconsistent with current facts, especially considering the government's success in reducing the fiscal deficit.
He said the national economy continued to grow at a rate of 4.4 percent in the first quarter of 2025, while inflation remained low at around 1.5 to 1.9 percent, with projections remaining below three percent for the year.
He added that Malaysia's record-high approved investments of RM378.5 billion also affirm strong confidence from both domestic and foreign investors.
'In fact, the American Malaysian Chamber of Commerce (AmCham) has described this growth as a sign of economic resilience and a stable business environment.'
'Therefore, these fiscal and economic achievements are the best response to negative claims suggesting the country's economy is worsening.'
'The current administration must continue to present verified data, communicate real successes, and be transparent about challenges and solutions.'
'With this approach, public perception can be corrected, and confidence in government policies can be strengthened,' he said.

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