Malaysia’s Anwar to unveil bold budget with tax hikes and subsidy cuts: analysts

Malaysians may have to pay more for everything from sweets and eggs to petrol from next year if subsidies are slashed as expected in Friday’s budget, analysts say, but the minimum monthly wage could rise from 1,500 ringgit (US$350) as the government seeks to spend during a rare period of political stability.

The budget comes after Malaysia’s stronger-than-expected economic performance steered by Anwar’s two-year-old administration, while the ringgit became the world’s best-performing currency in late September when it gained over 12 per cent against the US dollar due to rising investor confidence in the country’s growth outlook.

But cost-cutting measures are also likely as Anwar, who is also finance minister, looks to trim Malaysia’s fiscal deficit and slash 1.5 trillion ringgit (US$353 billion) of debts, which were blamed on the 1Malaysia Development Berhad (1MDB) financial scandal and the excesses of past administrations.

Economists expect an end to subsidies for sugar and eggs and a revamp of scholarship schemes in the education sector to exclude the highest income groups under next year’s budget, saving at least 2 billion ringgit in public spending.

“For fiscal consolidation to take hold sustainably, on top of healthy economic growth, we believe the government will try to raise more revenue or reduce subsidies, or both,” said Andrew Wood, a Singapore-based sovereign analyst at credit rating firm S&P Global Ratings.