Aimi Zulhazmi Abdul Rashid of Universiti Kuala Lumpur said despite challenges such as economic uncertainty and geopolitical tensions, the decision to restructure finances, including rolling out targeted subsidies, had borne fruit.
He praised Prime Minister Anwar Ibrahim’s administration for implementing targeted subsidies, a policy which had been shunned by Anwar’s predecessors despite its benefits for the federal government’s coffers in the long run.
“Restructuring the government’s finances is complex, but the Madani administration had the political will to do it,” he told FMT.
It was reported last week that the government’s fiscal deficit dropped to RM21.9 billion for the first quarter of 2025, representing a 17% reduction from the RM26.4 billion in the same period of last year.
According to a report by the economy ministry, revenue registered by the government increased to RM72.1 billion from the RM70 billion previously recorded, driven by an increase in sales and service tax receipts and stronger individual income tax collection.
Total federal expenditure decreased to RM94.2 billion, mainly due to lower subsidy spending after the removal of diesel subsidies and a drop in global oil prices.
Aimi said according to the latest data, the country is not only on the right track, but government policies have had a positive impact.
He also praised government agencies for their efficiency, which played a role in reducing the fiscal deficit.
“They reduced leakages and extended aid to the needy. Such an achievement isn’t easy as it requires political stability and careful planning,” he said.
Idham Md Razak of Universiti Teknologi Mara said the lower fiscal deficit would help increase investor confidence, strengthen the ringgit, and provide some fiscal space to cushion any future economic shocks.
He said fiscal space provides a government flexibility in making spending choices while maintaining financial stability and long-term debt sustainability.
Idham said the country’s recent performance would be the base for long-term economic transformation, especially in terms of increasing competitiveness through the green economy, among others.
“There is a need to focus on the hi-tech industry such as semiconductors and the digital economy, as well as value-added agriculture to increase productivity and exports,” he said.
He also said there is a need to introduce progressive taxes which could strengthen the country’s fiscal standing.