Putting a lid on the country’s RM687b debt or more
Tun Dr Mahathir

By MOHAMAD AZLAN JAAFAR / Pic By TMR

It is a surreal feeling. At times, it feels almost magical. For many, it is hard to draw a parallel comparison.

The indelible ink on the fingers of many continues to be a stark reminder of the earth-shattering outcome that will live forever in the memory of Malaysians, young and old.

What happened in the last decade has created a “bold, calm and bloodless” rakyat uprising.

Pakatan Harapan has ended Barisan Nasional’s 61-year rule. And Tun Dr Mahathir Mohamad has returned to helm Malaysia after his voluntary retirement 15 years ago.

CNN said, “Dr Mahathir’s victory is all the more remarkable, considering he is 92 years old, and was fighting the very party he led for over two decades.”

The Wall Street Journal, which has been at the forefront in exposing the 1Malaysia Development Bhd scandal, wrote: “Former leader Dr Mahathir will return to the premiership after pulling off an astonishing election upset to defeat the ruling coalition of his former protégé, (Datuk Seri Mohd) Najib Razak.”

ABC news headlines: “Malaysia Election: Mahathir Mohamad makes shock return as opposition wins poll.”

Dr Mahathir’s return as the world’s oldest prime minister has been extraordinary. Fifteen years ago on at the end of Oct 2003, I was at Dr Mahathir’s last press conference as the prime minister. Tun Dr Siti Hasmah Mohd Ali was also present.

He wished that Malaysia and its people would continue to prosper and stay on the right path.

After talking to the press, he proceeded to chair his last Cabinet meeting and then left Perdana Putra for the very last time to the cheers of hundreds of well-wishers who came to send the couple off.

At the time, I don’t think he would ever imagine that he would return to the administrative capital for the second time under the circumstances that had unfolded in recent months. It is a different Malaysia than the one he envisaged.

Dr Mahathir and new Deputy Prime Minister Datuk Seri Dr Wan Azizah Wan Ismail, together with newly appointed Finance Minister Lim Guan Eng, will have to carefully navigate uncharted waters, which by all accounts is more tricky than it was during the financial crisis of 1997/98.

The country’s governance needs resetting. The rule of law requires reactivating. Social justice, equality and fulfilling Pakatan Harapan’s promises are on his agenda.

But what is paramount for the new leadership to address is the government’s overwhelming debt. At the end of 2017, government debt stood at RM686.8 billion.

In fact, the country’s total external debt, loans taken by the government, individuals and companies, was higher at RM883.4 billion by the end of the same period.

In the last decade, the government’s obligations had been ballooning at a phenomenal rate. In 2009, the debt owed by the government was RM362.3 billion. By 2012, it had exceeded the half a trillion ringgit mark even though the government maintained the debt level below the 55% threshold of the country’s gross domestic product (GDP).

But at the same time, government revenue had failed to keep up. Malaysia’s revenue was RM158.6 billion about a decade ago. Last year, the government revenue was estimated at RM218 billion.

A substantial amount of the revenue in the last two years came from the Goods and Services Tax, delivering an astounding RM44 billion last year, or around 20% of the government’s income.

Two key worries: Servicing the debt and the off-the-book liabilities. The government debt services charges had risen from RM6.4 billion in 1997 to an estimated almost RM29 billion last year. Such high debt charges reduce the government’s reach for investment in key sectors like education, health and social developments.

But what is more worrying is the exact figure of the debt. Contingent liabilities or off-the-book loans are debt guaranteed by the government. In the last decade, the government had used contingent liabilities to finance many state-owned projects.

Some estimate that the government’s total debt, including the contingent liabilities, will be above 70% of the GDP. Debt servicing is also estimated to border RM30 billion this year.

Dr Mahathir’s new team together with the Council of Eminent Individuals had given the guarantee to address the horrific debt problem. It will be a difficult and arduous challenge at all levels, from identifying the source to restructuring them to an acceptable level.

Fifteen years ago, Dr Siti Hasmah was a relieved wife who said she was happy that “the people have returned my husband back”.

That luxury may have to wait as the nation rushes to put its finances in order.

  • Mohamad Azlan Jaafar is the deputy editor-in-chief of The Malaysian Reserve.