Datuk Seri Najib Tun RazakPUTRAJAYA, Jan 20 (Bernama) -- The government on Tuesday revised the country's fiscal deficit target for 2015 to 3.2 per cent of gross domestic product (GDP), up from the 3.0 per cent set out in the Budget, in the wake of falling oil prices.
Prime Minister Datuk Seri Najib Tun Razak said without any fiscal measures, the deficit would rise to 3.9 per cent of GDP.
Speaking at a special address here this morning, Najib said Malaysians have to accept the reality that the original Budget 2015 target could not be achieved, due to external factors such as the slump in global oil prices.
"But what is important is our commitment to further reducing the fiscal deficit," he said, adding the latest target is still lower than the 3.5 per cent in 2014.
The premier also stressed that the strategies announced by the government today are proactive adjustment measures following external factors beyond our control and that the country is not in an economic crisis.
He explained that at the forecast oil price of US$55 per barrel, there will be a revenue shortfall of RM13.8 billion.
"Despite the savings of RM10.7 billion from the implementation of the managed float mechanism for retail fuel prices, the government still faces a revenue shortfall of RM8.3 billion to accommodate the 2015 Budget measures," he said.
The situation requires the government to take measures to reduce the deficit in line with the government's commitment towards fiscal consolidation, he said, adding the government will not compromise on its national development planning and neglect the people's welfare.
On the ringgit, Najib said the local unit is not the only currency to have depreciated against the US dollar, as nearly all regional currencies have weakened against the US dollar since September 2014.
?The recent volatile capital flows and significant fall in the value of the ringgit were also due to concerns over the impact of the sharp fall in oil prices, he added.
However, Najib said, the government is confident that over time, the ringgit's exchange rate will adjust to reflect Malaysia's strong economic fundamentals.
"Of importance, our financial system continues to function in an orderly manner. Most importantly, there has been no disruption to financial intermediation with lending activities continuing smoothly," he said.
Furthermore, he said, greater policy flexibility, adequate international reserves, deeper and more diversified financial markets, sound banking system and strong domestic institutional investors will increase the country's resilience to volatile cash flows.
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