Malaysian Finance Minister Lim Guan Eng said on Thursday the new government will be able to meet the 2.8 percent fiscal deficit target in 2018, after a slew of austerity measures were planned to alleviate the country's fiscal position.

The new government led by Prime Minister Mahathir Mohamad is faced with a severe challenge to fulfill promises such as removing the unpopular 6 percent Goods and Services Tax (GST) while containing a soaring debt level Mahathir said already reached 1 trillion ringgit (2,513.8 billion US dollars). Besides from zero-rating the GST, the government also vowed to maintain the current fuel price amid increasing crude oil prices.

Speaking at a press conference, Lim said the government will be able to collect 5.4 billion ringgit more in increased corporate taxes due to the rise in global oil prices and save around 10 billion ringgit after a plan to rationalize some expenditure.

The expenditure rationalization exercise includes a plan to review, defer or renegotiate some projects, scrapping non-essential operating expenditure and rescind certain budget allocations.

After counting all the items that will impact the revenue and expenditure, the projected fiscal deficit will increase from 39.8 billion ringgit to 40.1 billion ringgit, which would maintain the federal government budget deficit at 2.8 percent of the GDP, Lim said.

The government has also set up a trust fund, to which all citizens willing to assist the government to repay its debt can make donations. As of 3 p.m. Thursday, Lim said the fund has collected more than 7 million ringgit, less than 24 hours the fund was set up.

Though some people have criticized him of overplaying the debt situation and even causing the market to panic, Lim said the fundamentals of the economy remains strong. But he admitted poor financial health has hampered the government's ability to fulfill all campaign promises.

"As much we would like to implement all of the 100 day promises, the federal government is fiscally responsible and would not follow the previous government's example of fiscal imprudence which would almost certainly have led the country on a path to bankruptcy," he said. (1 ringgit equals to 25 US cents)