KUALA LUMPUR: The government will implement broader fiscal strategies such as subsidy rationalisation and expanding tax bases to manage fiscal deficits, an analyst said.
Tradeview Research analyst Tan Jia Hui told Business Times that these initiatives, along with improved tax collection efficiency, will help balance development spending and fiscal health.
She mentioned that the government is unlikely to significantly boost spending due to commitments to projects like the Mass Rapid Transit 3 (MRT 3) and the Johor Bahru-Singapore Rapid Transit System (RTS).
"Private finance initiatives (PFIs) are becoming the preferred funding mechanism, as demonstrated by the KL-Singapore High-Speed Rail, which is expected to be fully financed by the private sector.
"Similarly, MRT3 will be funded through government-guaranteed debt issued by DanaInfra Nasional Bhd, a Ministry of Finance-owned entity, rather than through direct fiscal outlays," Tan said.
She added that infrastructure projects should take precedence over short-term handouts, especially since the unity government is currently in the mid-election cycle and does not need to engage in voter pandering.
"Infrastructure investments create lasting legacies and have long-term economic benefits, unlike temporary boosts to voter sentiment.
"The government is likely to prioritise long-delayed projects like MRT3, the Pan Borneo Highway, and the Penang LRT, as well as urgent initiatives like flood mitigation," said Tan.
She noted that aside from trimming development costs through better project management and delaying non-essential projects, the government could balance development spending by broadening the revenue base beyond income taxes and improving tax collection efficiency.
"We expect more concrete measures in this direction to be announced during the upcoming budget presentation," the analyst said.