KUALA LUMPUR: The current level of the country’s debt proves that Malaysia’s economy has been well managed, according to an expert on the economy.
Harvard graduate Isham Jalil said this was true as the country’s debt was just 53% of the gross domestic product (GDP), below the maximum level of 55 per cent.
“Malaysia’s external debt is lower than its internal debt,” he said in an interview posted on Facebook.
Isham, who is also the prime minister’s special officer, also refuted the allegation that Malaysia would turn bankrupt due to the current level of debt.
“It’s reckless to say that the country will go bankrupt by having 53 per cent debt against the GDP.
“Look at other countries. Japan’s debt, for example, is over 100 per cent (of its GDP),” he said.
Besides, he said the adoption of the maximum level of debt at 55 per cent, an arbitrary level set in Europe 20 years ago, also showed that Malaysia had imposed it on itself despite that level no longer being adopted or adhered to by other countries.
“Even Germany and France broke the rule when their debts surpassed 55 per cent of their GDP.
“So did Greece and Italy. Italy’s debt has even reached 80 per cent.
“The European countries no longer used the maximum level of debt at 55%, but we still impose it on ourselves, which is good,” Isham said.
“If you want to ask an economic expert on the most suitable level of debt a country should have or what is a good or bad level of debt, I don’t think anyone can give you the answer.
“Even if the country has zero debt, there must also be the pros and cons to it,” he said.
Isham said what would be a problem for a country was when its external debt was too high, like what happened to Greece when it owed too much money to Germany that it was not able to repay.
“However, if we owe money to ourselves for the purpose of making investments to boost our economy, I think it is not a problem,” he said.
He added that one thing about debt was that as long as the economy continued to grow, the debt could always be managed.
“If we don’t take loans, we might have financial restraints to make investments.
“That is why in finance and economic considerations, having a debt is not necessarily bad,” Isham said. – Bernama