Power split ensures check and balance on govt guarantees

pic by RAZAK GHAZALI

PUTRAJAYA is in no hurry to act on the suggestion of the auditor-general (A-G) and place a limit on government guarantees to control its debt burden as there are checks and balances in place, said Finance Minister Lim Guan Eng (picture).

In his report issued on Oct 14, A-G Datuk Nik Azman Nik Abdul Majid urged the government to impose a ceiling after highlighting a rise of nearly 12% in government-guaranteed loans made by five statutory bodies and 29 other state-linked companies worth RM266.5 billion as at end-2018.

This has increased the federal debt by 7.9% to RM741.1 billion from RM686.8 billion the year prior on new borrowings worth RM131.6 billion, over half of which were used to repay maturing loans.

Nik Azman said although the government is authorised to provide loan guarantees under the Loan Guarantee (Corp) Act 1965, a policy must be established to fix a cap by considering the country’s financial position, as well as the applying company’s financial and project viability.

“At the moment, although these guarantees are under the Finance Ministry (MoF), we will go through the Cabinet to get approval. After the prime minister and the finance minister’s position separation, there is a check and balance,” Lim told reporters at the Parliament lobby yesterday.

Earlier in the Dewan Rakyat, Lim said the government’s debt position must be viewed as a whole after direct debt grew last year to 51.2% of GDP from 50.1% in 2017.

“The sole focus on direct debt is inaccurate and is not reflective of the government’s actual debt position as it not only includes direct debt, but also government guarantees and liabilities.

“Despite the challenges, we reduced the overall debt from 80.3% of GDP to 77.1% as at June this year,” Lim said in a response to a supplementary question from Datuk Seri Ismail Sabri Yaakob (Barisan Nasional-Bera).

Malaysia is hoping that its improved financial position and its balanced 2020 budget will win the confidence of investors and ratings agencies, which have kept the country’s credit ratings high at A3 or A-.

“It has not been downgraded, but maintained and this is a vote of confidence that the government can manage the financial crisis inherited from the previous administration,” Lim said.

On a separate note, Lim said the government will issue an official statement on the issuance of the second Samurai bond once it is confirmed.

“This involves international issuance, let it be done through a formal statement so, there will be no misunderstanding,” Lim said.

In a statement issued last month, the MoF said Malaysia has agreed with Japan on a second yen-denominated bond at a rate of 0.5%, with a maturity term of 10 years.