Malaysia helps poor, raises taxes for rich in 2023 budget

In this photo released by Malaysia's Department of Information, Malaysia's Prime Minister and Finance Minister Anwar Ibrahim delivers his 2023 budget speech at the Parliament in Kuala Lumpur, Malaysia, Friday, Feb. 24, 2023. (Malaysia's Department of Information via AP)

In this photo released by Malaysia's Department of Information, Malaysia's Prime Minister and Finance Minister Anwar Ibrahim delivers his 2023 budget speech at the Parliament in Kuala Lumpur, Malaysia, Friday, Feb. 24, 2023. (Malaysia's Department of Information via AP)

Malaysia's Prime Minister and Finance Minister Anwar Ibrahim, center, poses with a briefcase containing his 2023 budget speech as he leaves the Finance Ministry building for the Parliament in Putrajaya, Malaysia, Friday, Feb. 24, 2023. (AP Photo)

Malaysia's Prime Minister and Finance Minister Anwar Ibrahim, center, poses with a briefcase containing his 2023 budget speech as he leaves the Finance Ministry building for the Parliament in Putrajaya, Malaysia, Friday, Feb. 24, 2023. (AP Photo)

Malaysia's Prime Minister and Finance Minister Anwar Ibrahim, center, poses with a briefcase containing his 2023 budget speech as he leaves the Finance Ministry building for the Parliament in Putrajaya, Malaysia, Friday, Feb. 24, 2023. (AP Photo)

KUALA LUMPUR, Malaysia (AP) — Malaysia will raise development spending and plans new taxes for the wealthy in a smaller budget plan this year, as the new government seeks to balance between spurring economic growth and reining in the budget deficit.

Three months after his election victory, Prime Minister Anwar Ibrahim unveiled a 386.1 billion ringgit ($87 billion) national budget in Parliament on Friday that focuses on helping people grappling with the rising cost of living amid an economic slowdown.

Fuel and other subsidies, along with cash aid for the poor, farmers and industries are being retained, and new incentives will aim to tackle youth unemployment and bolster foreign investment. Anwar said the income tax system will also be rejigged to lower taxes for some 2.4 million middle-income earners but raise taxes for those in the high-income group.

Anwar, who is also finance minister, said the government plans to introduce a luxury goods tax this year and is considering a capital gains tax. The budget also proposed 97 billion ringgit ($21.9 billion) in development spending, up from 71.6 billion ($16.1 billion) last year.

But Anwar said the country faced key challenges including a high national debt, global economic slowdown and slow recovery in foreign investment.

He said Malaysia's economy is forecast to expand at 4.5%, down sharply from 8.7% last year. He said the country needs to improve its public finances, as national debt and liabilities had surged to over 1.5 trillion ringgit ($338 billion), or 80% of gross domestic product.

While spending by previous governments rose to cope with the COVID-19 pandemic, Anwar said billions of dollars were also lost due to corruption and leakage. He said projects awarded by the previous government without public tenders have been canceled and that new tenders will be called to ensure transparency. His government is aiming to narrow the budget deficit to 5% of GDP this year, from 5.6% last year.

“A major shift is needed ... a shift to fight corruption that has denied our people opportunities to enjoy a more meaningful life, to good governance in our spending and to socio-economic empowerment,” he said. “We may have different political views, but don't let our differences prevent us from making real changes."

Anwar's alliance formed a unity government with other smaller parties after November's election led to a hung Parliament. He faces another test with elections due in six states in the next few months that would determine the strength of his government against a strong Islamic-dominated opposition.