Friday, August 3, 2012

Climbing Public Debt

Fitch Ratings on Wednesday let on that Malaysia’s public finances are weak relative to those of its ‘A’ range peers and the country is now on par with more heavily indebted ‘A’ range sovereigns such as Italy. [For those who didn’t know, Italy is considered one of the countries at risk of a debt default].

This comes after economists said that the federal government’s debt, which nearly doubled since 2007 to RM421 billion, poses a fiscal risk to the country if not managed carefully as it impairs Malaysia’s resilience to economic shocks, which appear to be occurring with increasing frequency.

In fact, in 1Q 2012, this debt has spectacularly ballooned to RM470 billion – the highest debt in Malaysia’s history! (Webpage
http://aliran.com/9854.html).

According to Aliran’s Dr Subramaniam Pillay, our debt is about 54 percent of GDP – the second highest in Asia. Just to put this into perpective, Indonesia has a debt of only 23 percent of GDP and Singapore has no debts (ibid).

Fitch has warned that the deterioration in public debt ratios is affecting Malaysia’s credit profile and a lack of progress on fiscal reforms could lead to a ratings downgrade.

What is also alarming is the fact that “general govern
ment revenues (24% of GDP in 2011) remain well below the ‘A’ range median for general government revenues (33%)” (Malaysian Reserve, August 02, 2012, p 4). So the government is earning less but they are determined to spend beyond their means. We must thank Najib Razak for his vote-buying schemes such as BR1M, TR1Ma, KR1M, SARA 1Malaysia and others.

On Wednesday, SUBS members proceeded to Fong Lye Restaurant in Sunway Pyramid to help Leong Ken Yien celebrate her birthday. The photos below refer:

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