Speaking to FMT, he rejected a report that attributed outflows of capital from Malaysia to investors’ doubt that the administration of Dr Mahathir Mohamad would be able to chart a viable growth path.
He was referring to a report by Nikkei Asian Review (NAR), which said the removal of the goods and services tax (GST) and some other government decisions had deepened the dip in the share market and reduced the value of the ringgit against the US dollar.
NAR said the revelation that the national debt was more than RM1 trillion, far higher than previously thought, had added fuel to the fire.
Rais said Malaysia was not the only country in the region suffering stock market and currency dips.
“An impending China-US trade war, the US fiscal correction and other external factors have jointly contributed to the situation,” he said.
“Telling the truth to the financial markets will always have its short-term impact, but sufficient fiscal discipline will ensure the trend will be reversed.”
He said the loss of GST revenue would be sufficiently compensated by the increase in oil prices from the budgeted US$50 to the current US$75 per barrel and the reintroduction of the sales and services tax.
“We should also not forget that the financial prudence path that this government is taking will eliminate leakages and malfeasance while the government’s strong anti-corruption stance and commitment to reforms will further improve the situation.”
He said the plan to borrow money from the Japanese at low interest rates to settle high-interest old debts would “immensely” reduce interest payments.
“Renegotiating lopsided large infrastructure contracts will also improve the nation’s fiscal state,” he added.
At the same time, he claimed, the government was crafting strategic financial policy options and ensuring that its financial plan would be holistic.
“It is a work in progress,” he said. “We need to be mindful it is laborious work and we have a very hardworking finance minister doing it. He will be announcing the holistic plan.”