KUALA LUMPUR (Reuters) - Zeti Akhthar Aziz, a senior adviser to the Malaysian government, said on Tuesday that a strategy for removal of the goods and services tax (GST) would be announced within one hundred days, but assured investors that fiscal balance can be maintained.
Malaysia’s new Prime Minister Mahathir Mohamad has promised to cancel the consumption tax, reintroduce fuel subsidies and review Chinese investment deals, raising concerns over the country’s fiscal strength.
The outgoing government had planned to collect 43.8 billion ringgit ($11.08 billion) in 2018, 18 percent of total revenue.
“What we will do well within the 100 days is to make an announcement of what we want to do and then it will be done by process, whether it has to go through parliament and get approval and so on,” said Zeti, a former central bank governor who is part of a newly appointed council of senior advisers.
Mahathir had previously vowed to get rid of GST within 100 days of taking office. He was sworn in as Malaysia’s seventh Prime Minister last Thursday after a surprise general election win over rival Najib Razak.
The council of advisers met about 180 fund managers in Kuala Lumpur on Tuesday to hear their concerns, and also reassure them.
Zeti, who led the discussions, told reporters after the meetings that many issues were raised by investors.
“But the point that I highlighted is that this change that is taking place in Malaysia is a historic development and it takes place at a time when our economy is doing well,” she said.
“And it is taking place at a time when the global economy is also rebounding, so this is a very positive environment to undertake these changes.”
Zeti said the country’s fiscal deficit would be improved by controlling expenditure.
“There will be a re-prioritizing of projects, efforts to increase efficiency of the government, efforts to reduce wastage of the public sector. All this will improve the fiscal position,” Zeti said.
Malaysian markets have reacted positively to 92-year-old Mahathir’s surprise election win. The stock market was up 0.4 percent at 0700 GMT on Tuesday after making a 0.21 percent gain on Monday.
The ringgit was also stronger after dipping offshore last week in the wake of the election.
Zeti said the ringgit will perform better when confidence is restored.
“Especially when the fiscal regime and the fiscal conditions improve, this is the final factor that will contribute to us having a better opportunity to have our ratings improved,” Zeti said.
Reporting by A.Ananthalakshmi; writing by Praveen Menon; editing by Raju Gopalakrishnan