Anwar announces steps to cut Malaysian deficit

Anwar announces steps to cut Malaysian deficit

KUALA LUMPUR (AFP): Malaysia's Finance Minister Anwar Ibrahim
outlined steps yesterday to slash the country's current account
deficit to four percent of gross national product (GNP) by the
end of next year.

"For this year, we expect the deficit to be reduced to five
percent and, with the adjustments we are making, it is expected
to further reduce to four percent in 1998," he told a local
bankers association dinner.

"Although improving, the current account deficit is still
large and needs to be further reduced," he said, noting that the
deficit had narrowed from 10.5 percent of GNP in 1995 to 5.2
percent last year.

Anwar said gross domestic product (GDP), which adjusts GNP for
foreign income, grew 8.45 percent in the first half of this year.
"We are confident of achieving a growth rate of eight percent for
the whole year, while the rate for 1998 is expected to continue
at a high level," he said.

"Our fundamentals are strong," he said, quoting from an
assessment by the International Monetary Fund (IMF) last Friday
which noted that "the economy's generally strong fundamentals had
not spared Malaysia from the contagion effects of developments in
neighboring countries."

In a bid to reduce imports, particularly the "bunching effect"
on the trade account, Anwar said the cabinet on Wednesday
endorsed plans to "defer the implementation of several large
projects" including the mammoth Bakun dam.

"Now that it is deferred, we have to explore other
alternatives so as not to jeopardize the energy situation by
around 2003," he said.

"For new privatized projects, they will be assessed in terms
of their macroeconomic impact before they are approved for
implementation.

"Only projects which are essential for improving the long-term
growth prospects and whose import content is acceptable will be
allowed to proceed. All new decisions on privatization will be
deferred until December," he added.

Anwar, who is also deputy premier, said government officials
would be provided with locally-made Proton model cars rather than
imported vehicles.

"The purchase of large foreign goods by government agencies
including the armed forces will be reviewed and canceled when
deemed necessary," he said.

But Anwar said the "main weakness" in Malaysia's balance of
payments was the "persistent deficit in the services account
which upsets the surplus recorded in the merchandise account.

"The services deficit is a structural problem which requires
long-term efforts," the finance minister said, noting such
efforts had caused a weakening of the trade balance in the short
term.