National debt stays below 55 percent of GDP

 |Nov 3, 2017
File pic credit Wikipedia.

KUALA LUMPUR: Prudent fiscal consolidation process seems to have moved the federal government debt to gross domestic product (GDP) away from breaching its own self-imposed 55 per cent debt limit.

The debt, which was on a declining trend from 54.5 per cent in 2015 to 52.7 per cent in 2016, stood at RM685.1 billion or 50.9 per cent of the GDP as at end of June 2017, according to the Economic Report 2017/2018.

“Of his amount, 96.7 per cent or RM662.4 billion was domestic debt (49.2 per cent of GDP) while 3.3 per cent or RM22.7 billion (1.7 per cent of GDP) was offshore loans.

“The federal government debt remains well-managed and categorised as moderate,” the Ministry of Finance said in a written reply in the Dewan Rakyat yesterday.

Government debt (also known as public interest, national debt and sovereign debt) is the debt owed by a government.

“Nothing wrong with loans made for the nation’s development, infrastructure, the good of the people, as well as to stimulate the economy. In the longer term, the resulting economy will be able to pay over the period of time,” Second Finance Minister Datuk Seri Johari Abdul Ghani said in an interview on TV3’s “Soal-Jawab” programme recently.

He said growth did not come at the expense of the government’s fiscal position as Malaysia’s economic activities today was driven by the private sector.

The private sector leads the development, for instance, some tolled roads and infrastructure like the mass rapid transit and light rail transit, are spearheaded by companies which borrowed for returns in the future, Johari said.

To ensure the federal government’s debt limit remains low and manageable, the country’s fiscal consolidation plans are expected to be continuously executed to reduce the deficit level in phases.

The fiscal deficit for 2018 is targeted to reduce further to 2.8 per cent of GDP or RM39.8 billion (2017: 3.0 per cent; RM39.9 billion), and accordingly, the federal government debt will remain sustainable within the prudent limit of 55 per cent of GDP.

Thus the government is on track to achieving its target of a fiscal balance by the year 2020, as spelt in the National Transformation Programme (NTP).

These developments will strengthen the nation’s economic fundamentals and resilience to further propel the country towards the milestones of a developed nation by 2020.

The NTP was launched in 2010, comprising the Economic Transformation Programme and the Government Transformation Programme, to improve the government’s delivery system and to drive Malaysia towards high-income status by 2020.

Beyond 2020, the Government is looking to double the size of Malaysia’s economy to RM2 trillion by 2025 from the estimated RM1.2 trillion next year, and join the ranks of the Top 20 countries by 2050. – Bernama