BANGKOK (Oct 13): Malaysia aims to reduce its fiscal deficit to below 3% of gross domestic product (GDP) within the next two years through fiscal consolidation, targeted subsidy reforms and stronger private-sector participation, said Finance Minister II Datuk Seri Amir Hamzah Azizan.

Amir Hamzah said Malaysia had reduced its fiscal deficit from 6.4% of GDP about five years ago to 3.7% last year, putting the country on track to meet its target.

Speaking at the International Monetary Fund (IMF) High-Level Seminar on Mitigating Sovereign Risks in Market-Access Countries here on Tuesday, he said fiscal consolidation would create fiscal space, strengthen Malaysia’s standing in international debt markets and improve its capacity to withstand future challenges.

Amir Hamzah said subsidy reforms are crucial to ensuring public funds are used efficiently, with assistance channelled to those who need it most.

“Untargeted subsidies actually wasted a lot of money. The key is identifying those groups and making sure your mechanism is robust enough to protect them, while freeing up space,” he said.

He said savings from targeted subsidies could be redirected to more productive sectors, while digitalisation and improved systems would help the government identify eligible recipients more accurately.

Malaysia’s economic fundamentals remain supportive of its fiscal consolidation efforts, with GDP growth above 5%, inflation below 2% and unemployment at around 3%, he added.

However, Amir Hamzah stressed that reforms must protect vulnerable groups while sustaining growth and encouraging greater private-sector participation to reduce reliance on government spending.

He said investment activity had strengthened, with foreign direct investment and domestic investment contributing roughly equally to the country’s economic momentum.

On debt management, he said Malaysia is focused on deepening its domestic capital market to enhance financing flexibility, support sustainable growth and create opportunities for private investors.

He also stressed the importance of maintaining adequate financial buffers to withstand potential economic and financial shocks.

Amir Hamzah said policy clarity and consistent implementation are essential to maintaining investor confidence and ensuring predictable access to capital markets.

Earlier, he led the Malaysian delegation to the 2026 IMF and World Bank Group Annual Meetings, held at the Queen Sirikit National Convention Centre here from Oct 12 to 18.

Uploaded by Tham Yek Lee