The govt is also looking to expedite the tabling of the Consumer Credit Act to promote a healthy credit market
by NG MIN SHEN / pic by MUHD AMIN NAHARUL
THE government will consider placing a limit on government guarantees available for public projects, said Prime Minister (PM) Tun Dr Mahathir Mohamad.
“There should be a limit on the amount that the government can guarantee. We have to look into that,” he told reporters after launching the National Strategy for Financial Literacy 2019-2023 in Kuala Lumpur yesterday.
He said this when asked whether there should be a cap on government-guaranteed loans, following recent revelations that a significant portion of the country’s RM1.1 trillion debt was comprised of government-guaranteed loans relating to scandal-ridden state fund 1Malaysia Development Bhd (1MDB).
“In the case of loans taken by the government, it should not exceed 55% of the GDP, but for guarantees, there is no limit. As a result, we see some guarantees amounting to very big sums, like RM42 billion,” Dr Mahathir said.
Last week, the special parliamentary select committee on the budget confirmed that as at end-2018, the country’s overall debt and liabilities amounted to RM1.09 trillion or 75.4% of the GDP on an accrual basis.
This includes RM132.7 billion worth of government-guaranteed loans, RM741 billion in federal debt, RM32.2 billion of 1MDB’s principal debt and RM184.9 billion in other liabilities.
The committee’s report also stated that overall government-guaranteed debt stood at RM266.5 billion as at end-December last year, of which the government is obliged to pay RM137.93 billion for TRX City Sdn Bhd (RM3.6 billion), SRC International Sdn Bhd (RM485 million) and 1MDB (RM5 billion).
Meanwhile, the government is also looking to expedite the tabling of the Consumer Credit Act in order to protect consumer interests and promote a healthy credit market, in line with efforts to improve financial literacy among Malaysians.
“(The Act will be tabled in Parliament) this year, as soon as possible,” Dr Mahathir said, adding that this is crucial as Malaysia’s household debt as at end-2018 comprised 83% of the GDP.
In his keynote address earlier at the event, the PM said the Act is important as it serves to ensure that credit users receive fair treatment when dealing with credit issuers.
Although the risks posed by Malaysia’s high household debt-to-GDP ratio to domestic financial stability are under control, signs of growing difficulty in repaying loans have emerged within society.
“This particularly affects borrowers who live in urban areas and earn less than RM5,000 per month. There has also been an increase in the number of borrowers who have joined the debt management programme offered by the Credit Counseling and Debt Management Agency (AKPK).
“Therefore, efforts to increase financial literacy are extremely important and will complement the initiative to table the Consumer Credit Act, to strengthen the credit consumer protection framework in Malaysia,” Dr Mahathir said.
The Act is being drafted through cooperation between the Domestic Trade and Consumer Affairs Ministry, the Housing and Local Government Ministry, the Entrepreneur Development Ministry, Bank Negara Malaysia (BNM), the Securities Commission Malaysia (SC) and other related agencies.
According to Dr Mahathir, the National Strategy for Financial Literacy is necessary in order to create a society able to make smart financial decisions, with financially literate individuals able to protect themselves from financial fraud.
He said financial literacy and skills, which can also contribute towards sustainable and inclusive economic growth, are the first line of defence for consumers in defending their rights when facing unfair market practices.
“In this increasingly complex and challenging financial environment, our ability to protect ourselves from unfair market practices or any form of financial fraud requires us to know the different shapes and modus operandi of financial crimes.
“Consumers must also equip themselves with best practices in technology usage in order to protect themselves from increasingly sophisticated cyber threats,” Dr Mahathir said.
Finance Minister Lim Guan Eng said the National Strategy for Financial Literacy is estimated to require RM1.87 million in expenditure, which will be borne by the members of the financial education network, namely BNM, SC, the Finance Ministry, the Employees Provident Fund, Permodalan Nasional Bhd, AKPK and Malaysia Deposit Insurance Corp.