Photographer: Ore Huiying/Bloomberg
economics

Oil Money Might Help Mahathir Fund Malaysia's Budget Without GST

  • Petronas revenue could fund wealth fund proposed in manifesto
  • PM Mahathir is seeking funding avenues to replace GST earnings

A promise to scrap the goods-and-services tax helped Prime Minister Mahathir Mohamad win an election that led to Malaysia’s first change in government since independence.

Now, the question is how he will fund the nation’s budget without the 44.3 billion ringgit ($11 billion) earned from the consumption tax in 2017 alone. The answer might lie in his coalition’s manifesto.

The Pakatan Harapan alliance pledged to set up a sovereign wealth fund using profits from state-owned oil company Petroliam Nasional Bhd. to provide future welfare for the people and stability to the country. That may help the government balance its budget as it moves toward scrapping the GST.

Petroliam Nasional, or Petronas as it’s commonly known, will provide a minimum of 10 billion ringgit a year of its income to the fund, which will be managed with similar governance to the Norwegian investment fund, according to the coalition’s manifesto released in March. Other state-linked companies will also be required to channel their earnings to the fund as long-term savings to the country.

That may go some way toward plugging the hole in the revenue left by the GST. Mahathir hasn’t said since the election if he will proceed with the plan.

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