Guan Eng says national debt ‘dangerous’, potentially disastrous

By Shazwan Mustafa Kamal
The Malaysian Insider
Jan 11, 2012

KUALA LUMPUR, Jan 11 — Massive borrowing and irresponsible spending by the Barisan Nasional (BN) government will result in Malaysia becoming a fully indebted nation before the end of the decade, Lim Guan Eng said today.

The Penang chief minister said that Putrajaya’s debt to Gross Domestic Product (GDP) ratio has increased yearly from 53.1 per cent in 2010 to 53.8 per cent last year and is expected to hit 54.8 per cent this year.

“This is extremely dangerous, and even more disastrous when coupled with statistics from Bank Negara’s Annual Report 2010, which revealed that Malaysia’s household debt at the end of 2010 was RM581 billion, or 76 per cent of GDP, thus giving us the dubious honour of having the second-highest level of household debt in Asia, after South Korea.

“In absolute terms, federal government debt rose by 71 per cent in four years to RM456 billion at (the) end (of) 2011 from RM266 billion at end (of) 2007,” said Lim in a statement today.

The DAP secretary-general said by following the same expansion rate, national debt would be a projected RM780 million by 2016 and RM1.3 trillion by 2020.

Lim’s remarks are in response to a statement by Malaysian Institute of Economic Research (MIER) distinguished fellow Mohd Ariff Abdul Kareem, who warned that federal government revenue was growing too slowly to keep up with its borrowings which hit 53.1 per cent of GDP in 2010.

Mohd Ariff told The Malaysian Insider recently that Malaysia’s national debt will hit 100 per cent of the GDP by 2019 should Putrajaya continue to borrow more than it earns. He said while the current size of government debt relative to GDP was not troubling, the pace of its growth in recent years was cause for concern.

Debt-to-GDP ratio jumped from 41.4 per cent in 2008 to 53.1 per cent in 2010 while government debt grew 14.6 per cent in 2008 and 18.3 per cent in 2009, far outpacing the country’s GDP growth, Ariff had said.

Lim added that a stagnation in salaries, coupled with increased prices for basic commodities such as sugar, eggs, and bread, will further result in Malaysians becoming even more debt-laden.

The Bagan MP said that MIER’s projections that Malaysia could end up becoming bankrupt by 2019 showed the need for new federal government, one that should be led by Pakatan Rakyat (PR).

He said that PR has successfully “managed” finances in states such as Penang.

“Penang managed to reduce (its) state debt from RM630 million in March 8, 2008 to only RM30 million as at end of October 2011. This represents a debt reduction of 95 per cent, or RM600 million, which is the highest debt reduction of any state in Malaysia’s history.

“Clearly, Malaysians who wish to have a better life for themselves and their future generations must make a choice between a government that is spendthrift and that borrows irresponsibly without being able to make the pie grow bigger, or a government that is prudent and transparent that will put the concerns of the rakyat first,” Lim added.

  1. #1 by yhsiew on Wednesday, 11 January 2012 - 7:54 pm

    Hope Pakatan would not inherit the mountain of debts from BN when it (Pakatan) takes over Federal power.

  2. #2 by HOHOHO on Wednesday, 11 January 2012 - 8:23 pm

    PENANG under PAKATAN power is one good example of FDI +++++ growth!

  3. #3 by monsterball on Wednesday, 11 January 2012 - 9:21 pm

    The only way UMNO b can govern forever is to bankrupt the country…all Malaysians finds it difficult to make ends meet and they behave like Santa Clause providing food aids…health aids…school aids and all sorts of aids where hungry loving parents…loving their young children…simply submit to the good deeds done…with no more will power to think…where the heck they get all the money from.
    That was their plan and still is….to be kings and lords…and we be slaves to the kindest Malaysians..which are actually the cruelest and most evil hearted dirty crooks.
    So what Lim Guan Eng a dream come true for Najib and his devilish men.

  4. #4 by sheriff singh on Wednesday, 11 January 2012 - 11:29 pm

    Guan Eng should concentrate on being a MP dealing with national issues. He should give up his state seat in the next GE and let others contest. Those elected at state will rule the state and select the CM from among themselves.

    Karpal said one man, one seat. So how about it? Don’t handle too many things. You will not have time for everything. Make your choice, like your dad.

  5. #5 by Loh on Thursday, 12 January 2012 - 12:08 am

    ///Mohd Ariff told The Malaysian Insider recently that Malaysia’s national debt will hit 100 per cent of the GDP by 2019 should Putrajaya continue to borrow more than it earns. He said while the current size of government debt relative to GDP was not troubling, the pace of its growth in recent years was cause for concern.///

    The real problem is that the debt is incurred more for operational expenditure rather than development expenditure. The government chooses to buy votes by increasing the size of public sector employment to doubling that of other countries like Philippines and Thailand, and in increasing allowances paid to senior government officers. Besides increasing the number of employees, the government also chooses to give them toys, such as the six vessels that would serve more for joy rides than anything else but they cost 9 billion ringgit and more. The 51 billion ringgit Kajang-Sungai Buloh MRT serves no developmental purposes beyond the construction industries and the spin-offs effect of the agents. That MRT project should stop when the new government takes over.

  6. #6 by Cinapek on Thursday, 12 January 2012 - 12:40 am

    YB LGE, when PR go campaigning for GE13 with such information, (and I believe it will become the key issues since the “Anwar sympathy vote” factor is now diminished with the non guilty verdict) , PR must translate this issue into simple layman terms and how it affects the man in the street.

    Talking in economic terms such as GDP, household debts, federal govt debts, debt-to-GDP ratio, etc means nothing to the average man in the street. He must be made to understand in simple layman terms the implications of these economic developments on his well being and the future well being of his children.

  7. #7 by monsterball on Thursday, 12 January 2012 - 1:04 am

    When Penang is solidly under DAP…you can bet..Lim Guan Eng will leave it in good hands and help all Malaysians.
    Best job for him is Minster Of Home Affairs and Tony Pua …Finance Minister….while Karpal and Lim Kit Siang as Advisers to PM..adding strength to Anwar’s leadership.
    Tian Chua should be a Deputy somewhere.
    Azmin on Education….Nurul will make a good Tourism Minister..perhaps the prettiest and the youngest too in the whole wide world.
    Education Ministry is a tough one. Needs long long term planning and immediate overhauling.
    My dream goes on…..

  8. #8 by monsterball on Thursday, 12 January 2012 - 1:11 am

    Hadi Awang should be Min of Educ.
    It needs a tough Muslim to deal with Muslims.
    He has shown he can do it by kicking Hasan Ali out of PAS.

  9. #9 by boh-liao on Thursday, 12 January 2012 - 1:18 am

    UmnoB/BN NO WORRY abt national debt as long as some PR-controlled states bring in d $$$$ so dat they can continue 2 SIPHON OFF $$$ 2 ENRICH themselves, simple logic mah

  10. #10 by lee wee tak_ on Thursday, 12 January 2012 - 3:59 am

    if you read bank negara’s report, it stated that BN administration incurred over RM90 billion of debts in 2011, more than half of the debt is to repay existing debts….so when BN say it raise debts to fund development, it is nonsense. It is just to delay actual repayment. just like borrowing from 2nd loan shark to pay off the 1st one

    //page 129: total gross borrowings for the year are expected to amount to RM96.6 billion. Of this RM90.2 billion or 93.3% constitute domestic source….Of the fross borrowings, RM51 billion is for repayments of existing debts….//

  11. #11 by cemerlang on Thursday, 12 January 2012 - 6:52 am

    You must have a real accountant to be a Prime Minister so that she knows how to balance the account properly. Everything is political. You are so naive to think that the government cares for you. They only care for your support. Because with power comes more fun to do whatever you want to do. The thing with Santa Claus is he only comes once a year and he says all the sweet nothings into your ears. If he really loves you, he should be with you everyday. Not today he comes with your toys and goes away and hides away comfortably in the north south pole the rest of the year.

  12. #12 by HJ Angus on Thursday, 12 January 2012 - 7:34 am

    It is basic economics that in the long term, a nation should try to live within its means or else end up bankrupt like Greece and a few other states. The USA too is bankrupt but being a superpower, it can still get away with it; maybe not for long more. China may replace it in 20 or 30 years.
    The BN has been trying to spend monies(it does not have) to create that nice feeling so it can call the polls soon. But Malaysians now are more politically aware and many feel we simply cannot carry on with BN’s wasteful ways.

  13. #13 by Bigjoe on Thursday, 12 January 2012 - 7:38 am

    Actually its not exactly correct. Its possible for Malaysia to take on more debt but NOT for the use of UMNO/BN system of administration. There is a lot of things that still need to be done and invested in and there is not enough savings from getting rid of corruption and waste to do it. However, getting rid of waste and corruption will allow the govt to borrow more, put into more productive use and THEN pay it off with higher productivity and GDP..

    If we wait until the debt is high, we would need to waste many years before anything new can be done. We have already wasted so many years because of UMNO/BN. Its time to get on with the job which UMNO/BN refuses to do..

  14. #14 by boh-liao on Thursday, 12 January 2012 - 9:24 am

    NR 2 LGE: Aisay man, HOW CAN M’sia in debt n bankrupt 1? Me n UmnoB look after national wealth good 1. If no $$$, HOW CAN we GIVE CASH 2 students n others like what we r doing now? U angry bird ah n ur comments poked eye 1

  15. #15 by dagen on Thursday, 12 January 2012 - 9:24 am

    In an earlier article, the author said our sovereign debt would hit 100% of our gdp soon.

    Actually the 100% mark does not mean much in real terms. I mean we could already be in deep trouble well before the mark is reached. We may now be at 53-54%. Are we ok economically at the moment? Weeeelll may be. Our economy is not collapsing yet. That is a fact ok. Not at the moment, anyway. So maybe we are really ok although on the ground retailers can tell you that consumers are buying less and less these recent years.

    The real issue is this. 100% is not a magic treshold of economic trouble. In other words at 54% now, we certainly cannot claim that we have a 46% margin of comfort before trouble strikes. In fact if the debt margin is moved northwards by just another few percentages, say, to – i dont know – 60, maybe 63% or even 65% then a totally different scenario could emerge. We could then have a severe economic problem – one which snowballs downhill all the way.

    You see, the river flow towards the free fall drop-off (into a waterfall) begins to turn rapid and turbulent quite a distance upstream of the drop-off point. When in there one would be as good as a gone never mind if the drop-off point is some distance away. In fact the water surface profile slopes downwards towards the fall-off point. That explains why the flow turns rapid.

    In terms of debt accumulation, I believe trouble will start when a certain critical mass (measured in total debt) is reached. This point could be some where before the 100% mark. I say that when a government starts to feel the compelling urge (which will soon turn desperate) to borrow more and more in order to keep the country going then the country is already in trouble. I believe that we are actually not too far from that point. The real economy needs XXX billions to run. This is alright. Feeding the economy is a productive exercise. It’s the unproductive competing needs for money that is causing the problem. The umno gobermen needs some xxx billions in order to shore up its inefficiencies and wastage; and corrupt practices; and needless and unproductive expenses (like buying submarines etc). Umnoputras’ collective greed requires some xx billions to satisfy. Umno’s party (election fund) requires some xxx billions. Special funds for families and wives of umno ministers etc (including prime minister and his deputy, I am sure) requires a further wot xx billions.

    It is no wonder that umno felt the need to borrow all the time in order to “develop the country” – an expression will encompasses the development of umnoputra’s personal wealth.

    We will be doomed soon. Dont look at the 100% mark. Its useless and meaningless.


  16. #16 by hvpl on Thursday, 12 January 2012 - 10:28 am

    We need to explain this in lay man terms, so that the pakcik & macik can understand that THIS is affecting their daily lives and will do so more significantly in their future AND the future of their children & grandchildren.

    Problem with highly educated people is that they tend to reason like in university-grade debates. But we need to convince the ordinary folk, not the largely educated people.

    What do they understand by “National Debt”? And how it affects our humdrum daily lives? Any smart ass commentator out there will attempt to explain that in terms that ordinary folk can relate to their daily lives?

  17. #17 by Godfather on Thursday, 12 January 2012 - 11:16 am

    They are talking about PROJECTIONS. They project GDP growth for the next year, they project tax revenues. By the time you and I find out that their projections are wrong, then it will be too late. My view is that it is probably too late anyway, and the rating agencies are watching closely. We will see what happens when Europe crumbles, as it surely will.

  18. #18 by HJ Angus on Thursday, 12 January 2012 - 11:26 am

    I agree we do not have to reach 100% debt to be in serious trouble.
    It’s like taking a housing loan so that repayments make up only say 35% of one’s income.
    The moment you lose your earning capacity, you will be in financial trouble.
    Nations can of course print money but the currency loses value.
    The big problem with Malaysia is that it needs structural reforms in the education system and also the size of the civil service. When we spend about 70% of the budget on operating costs, there is very little left to create capacity.

  19. #19 by sheriff singh on Thursday, 12 January 2012 - 11:56 am

    We must have a law that sets the debt ceiling for the country. Any increase must be approved by Parliament after debate.

  20. #20 by boh-liao on Thursday, 12 January 2012 - 1:57 pm

    Approved by Parliament? UmnoB/BN very glad 2 comply after all they CONTROL P’ment

  21. #21 by sheriff singh on Thursday, 12 January 2012 - 5:39 pm

    You are short sighted. Go see a dentist. He will cure you.

You must be logged in to post a comment.