By ALIFAH ZAINUDDIN / Pic By MUHD AMIN NAHARUL
The government could issue debt papers and dispose of non-core assets as Malaysia sought to raise capital and plug its financial shortcomings with rising liabilities reaching RM1 trillion.
The new Pakatan Harapan government shocked the country with its total debt announcement, largely pushed by guaranteed lending as state-owned companies like 1Malaysia Development Bhd (1MDB) and others agencies amassed billions of loans.
With revenues plummeting after the abolishment of the Goods and Services Tax (GST) and the impending billions in unpaid refunds for GST and income tax, the government needs to shore up its finances.
Finance Minister Lim Guan Eng (picture) said the new administration will consider a mix of short-term financing alternatives including issuance of sovereign debt and disposal of non-critical and non-strategic assets through stake sales, land and leasing of idle federal assets and buildings.
He said the issuance of sovereign debt is the simplest, most reliable and easiest to manage due to the size of our institutional investors.
“Rest assured that the additional debt issuance will be gradual, as well as transparent to the market via announcements through the auction calendar as per current practice,” he said in a statement.
He reiterated that such measure would ensure investors appetite and subscription of the papers without huge changes to the yields.
Putrajaya is also working on an economic roadmap that will steer Malaysia away from a path of global kleptocracy to sustainable growth with fiscal discipline, prudent budgeting, monetary stability and low inflation.
Lim said, while Malaysia may be suffering from legacy issues of corruption and external risks, institutional reforms by Prime Minister (PM) Tun Dr Mahathir Mohamad’s administration is expected to restore confidence.
“If Malaysia can success-fully navigate the fiscal challenges over the next three years, those who invest can expect a substantial profit or return on investment later,” he said.
Dr Mahathir’s return as PM with a young government showcases a mix of experience and youth, administrative and technical competence, as well as a passion to clean up Malaysia and fight corruption.
While Malaysia must grapple with the RM1 trillion debt for the next three years caused by the 1MDB scandal, and the decline in the value of the ringgit caused by the looming trade war between the US and China, Malaysia remains an attractive option, Lim said.