by SHAZNI ONG/ pic by TMR FILE
THE government is on track to meet the deficit target of 3.4% of GDP for this year and will raise RM52 billion worth of net direct debt for development expenditure purposes.
Finance Minister Lim Guan Eng (picture) said the RM52 billion worth of net direct debt for this year was outlined during Budget 2019 and it is lower than the 3.7% of GDP fiscal deficit or RM53 billion that was recorded in 2018.
“The funds raised are entirely allocated for the purposes of development expenditure such as roads and infrastructure for the public,” he said in a statement today.
Lim also refuted allegations that the net direct debt raised to date, or RM58 billion on Sept 26, has already exceeded the budgeted RM52 billion for the full year.
He said the claims were baseless and false as the RM58 billion figure failed to take into consideration two key factors.
“First, the government issues and redeems its debt and securities regularly each year based on its yearly debt issuance and redemption schedule.
“For the whole year, the government plans to raise RM135.7 billion worth of gross direct debt, while redeeming RM83.3 billion in return,” Lim said.
As such, he said RM38.8 billion has been redeemed in the January-August 2019 period and another RM44.5 billion will be redeemed in the September-December 2019 period.
Lim added that looking merely at the current net direct debt figure without taking into consideration the planned redemption of debt and securities for the remainder of the year would give a grossly inaccurate picture of the country’s debt levels.
“It deliberately distorts the picture by looking at the monthly picture instead of the entire year, as the annual budget is done on a yearly and not monthly basis,” he said.
Secondly, Lim said, the issuance and redemption of debt necessarily fluctuates throughout the year in order to regularise the cashflow of the government.
“The issuance of debt will always be proportionally higher in the first half (1H) of the year because the revenue collection for the government is always lower in the same period.
“Correspondingly, the redemption of debt will always be higher in the 2H of the year because the government will collect higher revenues during this period,” he said.
Lim added that net direct debt figures should be analysed from the yearly perspective and not monthly, accounting for the full-year issuance and redemption plan.
“Any attempt to jump to conclusions based on mid-year or incomplete data is clearly intended to mislead and does not reflect the true financial position of the government.
“This has been the customary financial practice for the government even in the past and those claiming otherwise, despite being part of the previous government is being dishonest,” he said.
Lim said the revenue collected will also be used to pay off our existing debt and liabilities, including the 1Malaysia Development Bhd debt.