By AFIQ AZIZ / Pic By BERNAMA
The government’s debt is bordering the RM1 trillion mark, including what is dubbed as RM300 billion “hidden debt” and the RM705 billion borrowings already accounted for at the end of the first quarter (1Q) of the year.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the hidden debt would include all the borrowings which are guaranteed by the government.
“In the 4Q of last year, debts guaranteed by the government amounted to RM238 billion. So, if you totalled the 1Q’s RM705 billion debt together with the previous RM238 billion figures, the amount is already close to RM1 trillion. That is what I think what the prime minister (PM) meant,” he told The Malaysian Reserve in an email reply yesterday.
PM Tun Dr Mahathir Mohamad, in his first monthly assembly with the staff at the Prime Minister’s Department, said the country’s debt has spiralled to alarming levels.
“Previously, we never faced debts higher than RM300 billion. But now it has climbed to RM1 trillion,” he said in reference to the previous government headed by Datuk Seri Mohd Najib Razak.
The debt guarantees may include loans by government-linked companies (GLCs), government-linked investment companies (GLICs), infrastructure projects and other ministries’ loans including 1Malaysia Development Bhd’s (1MDB) debts.
Mohd Afzanizam said the government may introduce austerity measures to address the high indebtedness issue. However, he said revenue-boosting policy is vital as reducing expenditure alone would have an impact on the country’s economic growth.
“It is important to contain fiscal deficits from widening to avoid debts from escalating,” he said, adding that the government could look at the size of the debt in relation to the gross domestic product (GDP).
“This is to give us a sense on the ability of the government to repay its debts as revenue collection moves in tandem with the GDP,” he added.
As such, Mohd Afzanizam said the government should demonstrate a strong ability to collect more taxes when the economy is growing at or above its potential.
“The total debt-to-GDP ratio is also critical to be addressed,” he added.
The country debt-to-GDP ratio stood at 51% as of last year, but the figure would be higher if it took into account the off-the-book debt.
Meanwhile, in his first address to civil servants, Dr Mahathir urged them to support the new government in restoring the country’s former glory.
“As administrators, one must put the rule of law above all else, and those tasked to carry out their duties must help to clean things up so that Malaysia can be on the road to recovery,” he said.
“We are confident that we can overcome the challenges, but we need civil servants who are efficient and trust-worthy to achieve this.”