Kuala Lumpur - Malaysian Prime Minister Najib Razak on Friday announced that the government would cut spending in its 2010 budget to rein in a growing deficit. Najib announced a budget totalling 191.5 billion ringgit (55 billion dollars), out of which 53.2 billion ringgit (15.2 billion dollars) would be spent on development.
The new budget is 11.2 per cent less than last year's budget allocation of 215.7 billion ringgit.
With the reduced spending, Najib said the fiscal deficit is expected to narrow to 5.6 per cent of gross domestic product in 2010 from 7.4 per cent forecast for this year.
As part of further economic liberalization, Najib said 100 per cent foreign equity ownership will be allowed in corporate finance and financial planning companies. New tax incentives would be given to the Islamic finance sector until 2015.
Najib also reduced the maximum personal income tax rate from 27 per cent to 26 per cent from 2010.
In his speech, Najib said the budget reflected prudence in spending.
"Indeed, this budget touches the heart and soul of all Malaysians. Indeed, this is an earnest and sincere contribution from the government to the people," he said.
Earlier, the government also narrowed its forecast for the contraction in the economy this year to 3 per cent, from 4 to 5 per cent.
