Prime Minister Datuk Seri Najib Razak today moved to quell fears raised by a minister that Malaysia would one day go the way of Greece and Iceland and become a bankrupt nation.
In a written response to a question by Lim Kit Siang (DAP-Ipoh Timor) in Parliament, the premier gave an assurance that the government was taking steps to ensure that Malaysia’s debts would be reduced and maintained at a manageable level.
“Malaysia will not face problems like what is happening at present in Greece and Iceland.
“The financial position of the federal government will continue to be monitored and controlled responsibly.
“Our deficit is expected to be reduced and our debt level will continue to be controlled in the medium, long and short terms.
“These efforts will help to ensure that the level of deficit and debt of the government will not rise to a point that it affects the ability of the country to repay them,” he said in his reply.
In his query, Lim had voiced concerns that Malaysia would go the way of Greece and Iceland and had asked the prime minister to explain the government’s efforts in ensuring that the country would not have to seek the aid from regional and international communities.
Najib explained that the country’s debt level had reduced in 2009 to RM233.92 billion from RM236.18 billion in 2008.
“The country’s debt ratio to GDP between 2004 and 2009 remained manageable with an average of 34.6 per cent.
“In 2009, the country’s debt level was reduced although the ratio rose a little. The reduction was caused by the full repayment of medium- and short-term loans by the federal government and the private sector, which better balanced out the net takings by non-financial public enterprises,” he said.
He added that the strengthening of the ringgit to the US dollar had also contributed to the reduction of the country’s foreign debt levels.
“The ratio of foreign debt as at Dec 31, 2009 was estimated at 7 per cent and this mirrors the strengthening of export revenue to repay our debt obligations.
“The ratio of international reserves to foreign short-term debts is more than enough to accommodate 4.2 times of our short-term debts,” he said.
Najib said the government would continue to be prudent and pragmatic in managing Malaysia’s foreign debts in order to facilitate the diversification of external borrowings by the public sector and to minimise risk in large external obligations and the capacity to service debts.
“For the private sector, external borrowings will only be done if it is needed to finance productive economic activities capable of generating foreign currency receivables to repay loans,” he said.
To reduce foreign debts, Najib said the government was embarking on several proactive measures including the prioritisation of domestic borrowings that do not contribute to inflation.
“Also, to encourage financial and monetary stability while at the same time preserve balance of payment positions, foreign debt management is supported by a comprehensive monitoring and debt surveillance system. This is to enable early detection of any risk and weaknesses that could be caused by national debt exposure,” he said.
Najib also said the government was currently studying the restructuring of fuel subsidies, which is in line with its objective of consolidating the country’s staggered fiscal position.
“The 2010 Budget will stress steps taken to increase effectiveness, income efficiencies and the government’s expenditures,” he said.
The government, added Najib, would also continue to intensify public-private partnership programmes for several high-impact projects including high-speed broadband, federal development corridors and public transportation infrastructure.
“To strengthen our stream of income, the government is also taking efforts to introduce the Goods and Services Tax. Through this, the government’s earnings base will be broadened and it will further shelter us from fluctuating oil prices,” he said.
