Malaysia’s new finance minister is seen as a safe pair of hands as he takes on the immense task of bringing down debt while scrapping a consumption tax that was key to Prime Minister Mahathir Mohamad’s unexpected election win last week.
With investors bracing for a fallout when financial markets reopen on Monday, 92-year-old Mahathir moved quickly to name top cabinet posts on the weekend. He picked Lim Guan Eng as finance minister, and brought back some old names, like former central bank Governor Zeti Akhtar Aziz, to an economic advisory board.
Lim, who is secretary general of the mostly ethnic Chinese Democratic Action Party, was chief minister of the northern Penang state before the election and is a trained accountant. Penang is the country’s second-smallest state, but one of the largest contributors to the economy and home to foreign electronics companies, including Intel Corp.
His appointment “is encouraging,” said Julia Goh, an economist at United Overseas Bank Ltd. in Kuala Lumpur. “The new government understands the key economic issues and fiscal weaknesses at hand. We hope they can deliver the promises to the people yet ensure economic growth remains stable and the fiscal deficit is manageable.”
Lim’s main priority will be to reassure investors he can carry through Mahathir’s populist spending pledges without increasing government debt. Mahathir promised to remove a 6 percent goods and services tax within 100 days, raise fuel subsidies and increase minimum wages. He also wants to review large-scale investment projects awarded during the term of his predecessor Najib Razak.
Moody’s Investors Service and Fitch Ratings have already warned of risks to the budget if GST is abolished and not offset by other revenue-raising measures. The previous government had narrowed the deficit over time to 3 percent of gross domestic product, while…