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Malaysia's government is seeking an additional $11 billion in the Covid fund, as well as a larger debt ceiling


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Malaysia's government will seek parliamentary approval to lift the country's statutory debt ceiling and enhance cash for Covid-19 assistance measures, Finance Minister Tengku Zafrul Aziz told CNBC on Tuesday.


According to Zafrul, the new cabinet led by Prime Minister Ismail Sabri Yaakob plans to increase the Covid fund to 45 billion Malaysian ringgit ($10.8 billion) to benefit businesses and households.
He noted that this will bring the fund's total size to 110 billion ringgit.

 

In addition to the projected rise, the administration will seek parliament's consent to lift the debt cap from 60% to 65% of GDP, according to the finance minister.

 

“We believe it is incorrect to withdraw support too quickly when the economy improves...
We need to keep supporting the economy while it recovers, which implies keeping a fiscal expansionary policy in place until 2022,” Zafrul said on CNBC's "Squawk Box Asia."


The Malaysian government has spent 530 billion ringgit ($127.7 billion) on economic stimulation since the outbreak began.

 

As the country battled with the economic damage caused by the pandemic, Malaysia lifted its debt cap from 55 percent to 60 percent of GDP last year.
This is the first time the Southeast Asian country's debt ceiling has been raised since the global financial crisis in 2009.

 

The administration also raised its fiscal deficit prediction for 2021 from 5.4 percent of GDP to 6.5 percent to 7% of GDP.


On Oct. 29, Zafrul, who will present the government's budget for 2022, said he does not believe Malaysia is vulnerable to a credit rating fall.

 

“We've seen the reaffirmation despite the fact that the fiscal deficit has increased,” the minister stated.
“What matters is Malaysia's growth prospects and its commitment — in the medium to long term — to fiscal consolidation, which we remain committed to.”


In recent months, all three main credit rating agencies — S&P Global Ratings, Moody's Investors Service, and Fitch Ratings — have affirmed their ratings for Malaysia.

 

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