Malaysia not heading to bankruptcy, says finance minister

by ANIS HAZIM / Pic by MUHD AMIN NAHARUL

THE Ministry of Finance (MoF) has denied the allegations on social media that Malaysia will become bankrupt, stressing that the country’s debt level remains under control.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said in a statement on Thursday that Malaysia’s fiscal position is still strong and that the federal government has never failed to pay its matured interest and debts.

“High debt level does not mean the country is at risk of bankruptcy. Various international rating agencies such as S&P Global, Fitch and Moody’s constantly assess a country’s debt level along with other factors such as prudent fiscal framework and governance,” he said.

“This proves Malaysia’s reputation and ability as a debtor with a good repayment record,” the minister added.

Tengku Zafrul highlighted that 97% of the government’s total debt is in denominations of ringgit which reflects the economical debt management due to minimal exposure to the foreign exchange risk.

According to him, the country’s prudent debt is applied via existing laws such as Article 98 (1) (b) of the Federal Constitution, which stipulates that the government always prioritises debt charges over other operating expenses.

He noted that the External Borrowing Act 1963 also provides that the country’s offshore borrowings cannot exceed RM35 billion, which has a total borrowings of RM29.4 billion at the end of June.

Additionally, the Provisional Measures for Government Financing Act (Coronavirus Disease 2019 (Covid-19)) (Amendment) 2021 stipulates that the statutory limit of government debt shall not exceed 65% of its GDP, which stood at 60.4% of the country’s GDP as of the end of June.

There is also the Provisional Measures for Government Financing Act (Coronavirus Disease 2019 (Covid-19)) (Amendment) 2021, which stipulates that the statutory limit of government debt shall not exceed 65% of its GDP, said Tengku Zafrul. As at end-June, this debt stands at 60.4% of the country’s GDP.

He also noted that the International Monetary Fund acknowledged that Malaysia’s debt position was still at manageable levels, and S&P also expects that the government’s policy planning will support the strengthening of the country’s fiscal position.

“MoF wishes to reject the claims made by several irresponsible parties with malicious intent that Malaysia is soon to become bankrupt, as a South Asian nation had recently. Besides that, the MoF has made a formal complaint to the Communications and Multimedia Commission Malaysia on several false reports circulating on social media about the national debt position, which aim to confuse people and have the potential of affecting investors’ confidence in the country,” he said further.