Prime Minister Dr Mahathir Mohamad said today the government favours a balanced budget and will avoid adopting deficits in the future.

Mahathir, who is also the finance minister, said the practice of deficit budgets was not healthy for the country's economy.

"Our 2002 budget still has deficits. We have had deficit budgets a number of times. This is not healthy," he was quoted as saying by Bernama news agency at the 2003 budget dialogue session.

However Mahathir said cutting taxes would not help towards achieving a balanced budget.

"If we reduce taxes we will not achieve a balanced budget. Deficits may increase," he warned.

"If we spend too much... I am sure state representatives will ask us to spend more and more and there are those who ask for hundreds of millions... I am sorry, I cannot approve," Mahathir said.

No sharp cuts

Ramon Navaratnam, corporate adviser to construction giant SungaiWay Group told AFP that Mahathir could cut the deficit for the 2003 budget but may not be able to do away with it.

"It is a hint to Malaysians that there will not be any sharp cut in taxes or surge in expenses," he said.

Navaratnam, a former treasury secretary-general, said Malaysia has to increase revenue and reduce expenses to reduce the deficit.