Malaysia's Finance Minister Takes Office as Budget Doubts Linger

(Bloomberg) -- Lim Guan Eng, former chief minister of Malaysia’s northern Penang state, took his oath of office as finance minister on Monday as Prime Minister Mahathir Mohamad moves swiftly to implement his economic agenda.

Malaysia's Finance Minister Takes Office as Budget Doubts Linger

Lim, 57, is the first ethnic Chinese to hold the post in the majority Malay country in more than four decades. He was sworn in with 13 other cabinet ministers, including Azmin Ali, who will run a newly created economic affairs portfolio.

Barely two weeks into office, 92-year-old Mahathir is moving quickly to fulfill his coalition’s 100-day campaign pledges, having already scrapped a 6 percent goods-and-services tax that voters had blamed for their rising living standards. Lim’s priorities will include finding new income sources to replace the loss of GST revenue and to follow through with other election promises, such as reintroducing fuel subsidies and boosting minimum wages.

Bringing the country’s debt levels under control will be a key task. Credit-rating companies like Moody’s Investors Service have already raised concerns about revenue losses and Malaysia’s high debt levels compared to its A-rated peers.

Rising Debt

There’s also a lack of clarity on the published data. Mahathir told civil servants on Monday that government finances have eroded significantly and his administration is saddled with debt of 1 trillion ringgit ($252 billion). The Ministry of Finance’s most recent economic report puts federal government debt at 685 billion ringgit in 2017.

Azmin, who was the chief minister of Selangor state, is expected to focus on economic policy and run a department that has a similar role to the economic planning unit, which fell under the remit of the prime minister’s office in the former administration of Najib Razak.

Lim, who is secretary general of the mostly ethnic Chinese Democratic Action Party, was fighting a corruption case in court, allegations that he has previously denied and that his supporters said were aimed at damaging his political career. Lim’s lawyer has requested a review and withdrawal of the case by the new attorney-general.

As chief minister in Penang, Lim ran a state that’s a manufacturing powerhouse and one of the largest contributors to the country’s economy despite its small size.

©2018 Bloomberg L.P.