At the start of 2018, many of us laymen and industry professionals alike are keeping close tabs on the nation’s economic climate. Of course, not all of us are aware of what experts and statistics are currently saying.
Recently, some alarming statistics and figures have concerned ministers and economists alike;
1. A summary of Malaysia’s national debt in 2017
The Ministry of Finance reportedly revealed last November that federal debt stood at RM685.1 billion as of June 2017, up by almost a fifth from March 2016.
As of September 2017, the federal government’s debt stood at RM687.43 billion (51.1 per cent of gross domestic product). This does not include debt guaranteed by the federal government, which reportedly jumped 21% or RM39.6 billion to RM226.88 billion as at end-September 2017, from RM187.32 billion at end-2016.
This increasing debt has definitely raised some concerns among ministers and other experts.
2. How does Malaysia’s debt impact its citizens?
According to the Malay Mail Online, Gua Musang MP Tan Sri Tengku Razaleigh Hamzah stated at a G25 public forum that Malaysia’s inflating debt was preventing the government from providing universal economic wellbeing to citizens, saying,
“I would say, at the risk of stating the obvious, that our political leadership needs to be sensitive to and care for the economic wellbeing of the masses.”
“This level of comfort is to ensure that the people are not unnecessarily burdened by financial pressures that are out of proportion to the national ability to handle and manage.”
“In this regard, the sad reality is that our leadership has failed to keep in check the national debt that our country is in.”
3. What are experts saying about this debt?
Yeah Kim Leng, a professor and Sunway University’s Business School, stated that Malaysia’s national debt is at 52 per cent of its gross domestic product (GDP). Meanwhile, contingent liabilities guaranteed by the government, such as for loans taken by government-linked companies, were between 20 and 30 per cent of GDP.
According to the professor, total debt should not exceed 80 per cent of GDP. If it does exceed that percentage, Malaysia could be exposed to an economic crisis. He told Free Malaysia Today,
“When we reach 80%, it is not like we will go into economic crisis, but it has reached a maximum level and it is time to be prudent as the economy will become more vulnerable to the economic crisis or sovereign debt crises after that.”
This leads us to our next question…
4. What’s the reason behind Malaysia’s debt?
The Edge Markets recently cited The Edge Malaysia, which reported that this debt was due to excess spending. An excerpt from their report reads,
“A big part of the debt spiral is because operating expenditure grew an average 6% a year in the past 10 years to RM219.91 billion in 2017 from RM123.1 billion in 2007 — faster than its revenue growth.”
Meanwhile, Professor Yeah explains that Malaysia’s debt could be due to the amount of large-scale infrastructure projects going on in the country, citing the High-Speed Rail (HSR) between Kuala Lumpur and Singapore and the East Coast Rail Link (ECRL), which reportedly cost an estimated RM55 billion, as possible projects that could further increase Malaysia’s debts.
Debts could also increase rapidly if these projects do not bring returns soon enough.
On top of that, the professor also warned that economic growth could slow down once the national debt surpasses 80 per cent of GDP, leaving the government with less money to spend on education, health, and other services.
5. What happens if our national debt was to reach such levels?
Professor Yeah added that governments would typically begin to sell its assets and privatise its services and projects. These debts would also affect investments. He told Free Malaysia Today,
“If there is no confidence in the sustainability of a country’s growth, there will be an erosion of confidence.”
Less investments can lead to less jobs and stagnant salaries, which can make the economy even more vulnerable. He added that governance should be improved in order to pay off these debts and try their best to achieve a balanced federal budget as soon as possible.
Well, whatever it is, let’s hope the relevant bodies find a way to manage our country’s debt accordingly!
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