Sinking deeper and deeper

Business Times

MALAYSIA should take heed of the problems – the public anger, the social unrest – posed by the solutions offered to tackle rising sovereign debt in Europe. God forbid that we head that way!

The Auditor-General’s recent report pointed out that Malaysia’s national debt rose 12.3 per cent to over RM407 billion (S$165 billion) in 2010. The amount is equivalent to 53.1 per cent of gross domestic product. It’s the second straight year that the national debt has exceeded 50 per cent.

The figure is a reflection of the spending spree the country went on to mitigate the effects of the 2009 global financial crisis. At its peak that year, the budget deficit rose to 7.6 per cent of GDP, the highest in two decades.

It has since come down to 5.4 per cent of GDP and the government projects that it will decline further to 4.7 per cent of GDP next year. But that may be overly optimistic.

Everyone knows why the debt has piled up: persistently high budget deficits over 14 years. But it is the pace of the rise that’s alarming. Standout statistic: in the space of six years, total federal government debt has actually doubled from 2004. That way lies folly.

Malaysia’s debt position is close to breaching legislative levels set a long time ago by Parliament. According to the Auditor-General’s report, public debt from domestic sources rose RM41.76 billion to RM390.36 billion last year, while loans from foreign sources rose to RM16.75 billion, or up RM2.96 billion.

But the Loan (Local) and Government Investment Act caps the domestic debt ceiling at 55 per cent (of GDP) for the government, while the External Loans Act 1963 limits foreign loan exposure to RM35 billion. According to the report, the domestic debt level at end-2010 stood at 51 per cent of GDP.

The great irony of the situation is that it need not have come to that. The Auditor-General’s report revealed a litany of financial abuse in several government agencies. Leakages and wastage of appalling proportions were laid bare.

Marine binoculars being purchased at 25 times cost? Over RM5 million to buy horses? If all the wastage was cut and proper procedures observed all the way down, one suspects that Malaysia would be a budget-surplus country.

Nor is national debt going to fall any time soon. Next year, it’s estimated that the debt will breach RM455 billion – almost 54 per cent of GDP.

The danger for Kuala Lumpur is another recession stemming from the West’s economic woes. This time it cannot afford to spend its way out of it, like it did in 2009. On top of that, subsidies on fuel and other essentials like cooking oil, milk, rice and sugar remain intractably high at RM32 billion this year.

And the hits just keep on coming. According to the country’s central bank, the national debt as at June 30, 2011 has risen to RM437 billion, with domestic debt amounting to RM421 billion and foreign debt at RM16 billion.

  1. #1 by Godfather on Wednesday, 2 November 2011 - 5:31 pm

    Excellent ! This country needs to go bankrupt first before any serious change can be made. Of course by that time, the rich and famous would have absconded to Perth, London, Melbourne, Medan, Surabaya, Bali….but those who remain will hopefully have the strength to rebuild.

  2. #2 by Godfather on Wednesday, 2 November 2011 - 5:36 pm

    When the government has no more money to give away as free fertilizers or grants to rambutan growers like cintanegara or to cattle herders like the minister’s kids, then these people with tongkats will have to learn to compete in the real world.

  3. #3 by dagen on Wednesday, 2 November 2011 - 6:01 pm

    How many times must you ppl be reminded. This is all about the constitutional ketuanan rights of umnoputras. And to question that right is to anti-agung, anti-sultan, anti-islam jenis umno … you know the rest.

  4. #4 by dagen on Wednesday, 2 November 2011 - 6:11 pm

    If only umnoputras could cut their greed, the country would save something like (wot?) 2billion a yr. In the ten yrs run up to 2010 we could hv saved 20billion.

    Huh?!! Oh this money belongs to umnoputras. So they are kinda untouchable by the rest of us. So sorry cintanegara. I forgot that. Your money. None of my business!

  5. #5 by Bunch of Suckers on Wednesday, 2 November 2011 - 6:49 pm

    If there is no spending spree where/how those suckers are able to find ways to suck easily and bountifully?! Suckers are thinking that Bolehland is still far away from bankruptcy-never happen…

    All those suckers “can deliver” is to suck… They suck pretty good, genuine and easier ways… Suckers!!

  6. #6 by yhsiew on Wednesday, 2 November 2011 - 7:48 pm

    Perhaps this is BN’s strategy – spend to win the 13th GE first, why bother with the country’s rising debt?

  7. #7 by tak tahan on Wednesday, 2 November 2011 - 9:39 pm

    Aiseh man,this kind of problem easy la to solve.Just vote BN out,get hold of those culprits and order them to fly back the RM888 billion illicit money to bolehland.Then we still have slightly more than RM400 billion after paying off the current debt to share among us.Then grant those culprits some form of amnesty eg ask Godfather to spank their backside only three times,something like that la.

  8. #8 by monsterball on Wednesday, 2 November 2011 - 9:47 pm

    It is a disease cannot be cured.
    They are so used to spending easy come money…easy go and must make it come again…then gone..on and on…becoming a habit…and bluff themselves…it is their rights to do that for Malaysia belong to UMNO b forever…and all Malaysians are their subjects to do as they like…reward..divide…punish and talk too much….create a case to jail them.

  9. #9 by rockdaboat on Wednesday, 2 November 2011 - 11:24 pm

    They have no clue whatsoever as to how to manage the finance of this country. They only know how to korek korek korek. Yet there are still so many fools who continue to vote for them.

  10. #10 by waterfrontcoolie on Thursday, 3 November 2011 - 6:30 am

    The national education policy has been twittered towards this goal all along; so that the average rural folk would never understand what is happening in the rest of the world. They read only Bahasa, hence their ‘violent’ reaction towards the monopoly of thinking on those “subjects” that would continue to baffle those folks! We can only hope the awakening of those folks to realize the need for changes though this could be a little too late. That is why they are all worked up on Mat Sabu’s view on any champion of the poor! Indeed they need someone like Mat Sabu to awaken them from their slumber. Even PAGE offered them votes if English could be used. No way! this would be just temporary gain, they realize they would lose control of the thinking process of those “blind voters” !!!!!!. They would be out of business; surely they are a little smarter than this!

  11. #11 by k1980 on Thursday, 3 November 2011 - 8:10 am

    Jibbi is hoping that like Greece, 50% of Malaysia’s debt would be forgiven by its debtors….

  12. #12 by dagen on Thursday, 3 November 2011 - 8:11 am

    Dear cintanegara,

    Is it ok for the gobermen to pay 50,000 for something that costs 2000?

  13. #13 by undertaker888 on Thursday, 3 November 2011 - 8:26 am

    That’s the reason those goons raised the retirement age to 60. There is not enough cash to lump pay the retirees at 55 anymore. EPF is getting drier and drier by the day.

    This present govt is a liability. Those who continue voting them must be either stupid or is milking the gravy train.

  14. #14 by Taikohtai on Thursday, 3 November 2011 - 8:36 am

    Malaysia in quicksand?
    Sell! Sell! Sell! Singapore vely happy to buy all the sand you have.

  15. #15 by TheWrathOfGrapes on Thursday, 3 November 2011 - 9:15 am

    Before some smart alec comes along and say: “So what is the problem? Singapore’s public debt is 105.8% of GDP compared to Malaysia’s 52.4%.”

    Matthias Chang actually thought he has discovered some earth-shattering secret concerning Singapore’s national debt and published it on his website some time ago and screaming at all and sundry to short the Singapore Dollar. Don’t know whether that scoop is still on his website, but I pity those who followed his sure-win investment tip to short the Singapore Dollar – they must be hurting like hell right now.

    For those who do not understand Singapore’s financial strength, the CIA World Factbook will give a glimpse.

    Singapore’s public borrowing is largely to develop its debt and capital markets. It does not need to borrow for infrastructure development or consumption.

    The critical borrowing is the External Debt.

    Some numbers for comparison:

    Budget Deficit: 5.6% of GDP
    Public Debt: 52.4% of GDP
    External Debt: US$72.6bn
    Reserves: US$106.5bn

    Budget Surplus: 0.2% of GDP
    Public Debt: 105.8% of GDP
    External Debt: US$21.8bn
    Reserves: US$225.7bn

    note: for Singapore, public debt consists largely of Singapore Government Securities (SGS) issued to assist the Central Provident Fund (CPF), which administers Singapore’s defined contribution pension fund; special issues of SGS are held by the CPF, and are non-tradeable; the government has not borrowed to finance deficit expenditures since the 1980s

  16. #16 by boh-liao on Thursday, 3 November 2011 - 10:02 am

    Y MAKE noiselah, Y keep harping on d same thingy? It’s TAKDIR mah, UmnoB rule, OK
    UmnoB/BN believe dis nation is sooooo easi 2 govern, soooo much wealth 2 jiak (openly n obviously jiak too), no problemo 1, rakyat WILL STILL CONTINUE 2 vote 4 UmnoB/BN
    Dis nation is so blessed, won’t go bankrupt 1, $$$ everywhere, just drop fr d sky n oozing out fr d ground, even dirt like soil n limestone can generate billions of $$$
    UmnoB/BN – Make hay while d sun shines, JIAK PAPA while still in power lor

  17. #17 by cemerlang on Thursday, 3 November 2011 - 10:10 am

    umnoputras..princes of umno…even umno is not united malay national organization..tell me if you are a true blue malay, what constitutes a malay ?…umno is made up of malays, bugis, javaneses, what else down the family tree, sub tree, tree branch, got indian even, got true blue chineses even…hey you malay, you still call that umno ?

  18. #18 by cseng on Thursday, 3 November 2011 - 10:40 am

    The economy sink deeper after PM took over the Finanace Ministry (FM), PM can not question FM. FM’s only role is to ensure enough money for BN to win the election, the only job is to read the budget in parliment.

    If M’sian have no moral courage and obligation to voice-up/stand-up the wrong doing, m’sia is doomed. For that, the Malay majority is the decisive force. If the educated malay still ‘tidak apa’ and taking lead, we are doomed. It is not race, is not religion, is not even politic, just what is right and what is wrong.

  19. #19 by boh-liao on Thursday, 3 November 2011 - 10:45 am

    BUMIputra – literally means can make big $$$ fr soil, sand, limestone mah

    While we flip-flop n mooing over our education system, others r not Zzzzz-ing

  20. #20 by cemerlang on Thursday, 3 November 2011 - 12:34 pm

    Korang verse 32.7 all humans are bumiputras also known as earth prince because this verse says the first human were made from clay and clay is a type of earth and since the first humans, all humans carry that earthly element. Whoever is not made with earthly element cannot be a human. Don’t believe ? Read the Korang.

  21. #21 by AskChong on Sunday, 6 November 2011 - 9:45 pm

    We don’t have to wait 2019 to bankrupt. If BN still wins GE13, another 5 years our debt will goes double again (debt double from 2004 To 2011, so will goes double faster now).

    So, do your best to stop BN from winning GE13.

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