Malaysia forecasts federal debt at 63.7 per cent of GDP in 2027
The government targets a fiscal deficit of 3.3 per cent in 2027, while the Treasury secretary-general cautions against restoring GST now.
Malaysia expects its federal debt-to-GDP ratio to decline to 63.7 per cent in 2027 as fiscal reforms proceed, according to Treasury secretary-general Tan Sri Johan Mahmood Merican. The government’s deficit target for 2027 is 3.3 per cent of gross domestic product, compared with 5.5 per cent in 2022.
Addressing reporters in Kuala Lumpur on November 12 at Deloitte’s 52nd TaxMax conference, Johan outlined a projected debt ratio of 64 per cent for the close of 2026. The corresponding figure at end-2025 was 65.2 per cent. He attributed the expected improvement to efforts to strengthen government finances.
Johan described the expansionary approach in Budget 2027 as important for economic growth, low unemployment and higher household incomes. He said raising incomes remained a priority, with an increase in the minimum wage among the measures to help households manage living costs.
Economic uncertainty and pressure on household finances meant restoring the Goods and Services Tax (GST) might be ill-timed, Johan said. Substituting GST for the Sales and Service Tax (SST) at an equivalent rate would not necessarily generate extra revenue, he added. It could instead move some of the burden borne by businesses, including exporters, onto consumers.
Generating additional revenue might require a higher GST rate, which Johan said the government did not currently want. He said SST receipts amounted to 3.2 per cent of GDP, equal to GST’s share in 2017.
