MALAYSIA GOVERNMENT REVENUE AND PUBLIC DEBT – 1970 THROUGH 2019

Abstract

This study aims at examining Malaysia’s fiscal management over the past 50 yearswith a specific focus on investigating strength of relationship betweengovernment revenue and government debt.  Within the framework of Public Finance theory, this paper deploys Ordinary Least Squares (OLS) regression as an estimation tool to model the yearly data from 1970 through 2019. The empirical results from the study show that government revenues (tax revenue and non-tax revenue)do influence government borrowings or public debt in Malaysia.  From Pearson correlation coefficient, we observe a strong positive correlation between government revenue and government debt.  As such, government revenues from tax collections and public investments play an important role not only in financing public expenditure but also in sustaining an optimal fiscal policy.  Government borrowing that aims at financing accumulation of public capital would allow Malaysia economy to reach its long-term optimal growth faster.