The increase in debt is related to financing Malaysia’s development expenditure, fiscal deficit and 1MDB’s borrowings

by S BIRRUNTHA/ pic by RAZAK GHAZALI

THE government’s direct debt increased by RM94.1 billion to RM799.1 billion since Pakatan Harapan took over the administration until end-June 2019, according to Finance Minister Lim Guan Eng (picture).

The RM94.1 billion increase in direct debt financed the country’s development expenditure, fiscal deficit and debt repayments including 1Malaysia Development Bhd’s (1MDB) borrowings, Lim said in a statement last Friday.

He also refuted claims that direct debt had increased by RM245 billion. “Total 1MDB debt including its interest is RM50.5 billion, which will only be fully paid off by 2039.

“The government has paid RM13.9 billion to finance debt and interest relating to 1MDB and SRC International Sdn Bhd from 2017 until 2020,” he said.

Lim added that the RM13.9 billion payments for 1MDB and SRC are a direct loss to the people as these could have been used for the country’s welfare.

“I would like to take this opportunity to correct public misconception about external debt. External debt is different from the government’s direct debt.

“Unlike direct debt issued directly by the government, external debt comprises individual, corporate and government debt held by foreigners, as well as offshore borrowings and non-resident deposits,” he said.

According to Bank Negara Malaysia, the country’s total external debt stood at RM931.1 billion as of end-June 2019.

However, only RM190 billion of the external debt belonged to the government through its direct debt.

This statement was issued in conjunction with the country’s debt management committee’s (DMC) meeting and action plans discussion on Dec 2.

During the meeting, the committee highlighted the importance of containing government guarantees (GG) and public-private partnership (PPP) obligations.

“This is in order to avoid unnecessary inter-generational transfers of debt burden, where our children will be paying our debts,” Lim said.

The DMC endorsed the federal government’s 2020 borrowing programme, which includes the option of issuing another tranche of samurai bonds.

Malaysia marked its return to the Japanese bond market after three decades with the issuance of its first 10-year samurai bond earlier this year, as part of the government’s efforts to raise funds to repay borrowings incurred by the previous administration.

In August, Prime Minister Tun Dr Mahathir Mohamad confirmed a report by The Malaysian Reserve that the country is considering issuing a second samurai bond as it seeks cheap funding alternatives to plug the government’s financial gaps.

The DMC also evaluated existing and additional GG facilities and new best practices in assessing and monitoring contingent liabilities using the latest financial technology.

“The government is committed to consolidating its overall debt and liabilities,” Lim added.

In the medium term, the government targets to lower its debt and liabilities to 65% of GDP by the end of 2025, from 77.1% as of June 2019.

The debt and liabilities comprised the government’s direct debt, committed government guarantees, 1MDB debt and other liabilities, namely PPP, Pembinaan BLT Sdn Bhd and private finance initiative.