Government debt soars – and that excludes contingent liabilities

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Update: So with this in mind, the Malaysian government wants to send a second ankasawan on a junket to space (which would cost hundreds of millions of ringgit) – if funds permit. Well, do you think the state of our funds will ‘permit’ this?

Malaysian government debt has been steadily rising in recent years and is expected to touch RM502bn this year or 53.7 percent of GDP on the back of a rapid rise in issues of quasi-government bonds and securities. (The legal threshhold is 55 percent.) But this does not include sizeable contingent liabilities or off-balance sheet items.

Click to enlarge the following general government gross debt data from the International Monetary Fund:

At the onset of East Asian economic crisis, general government gross debt compared to GDP had sunk to a a low of 32.3 percent, according to IMF figures. By 2000, it had risen to 35.3 percent and by 2008, it had touched 41.2 percent. And now it is has soared to over 53 percent. (The increase in government borrowings is largely due to the rise in government investment issues and government securities, which reached RM412bn by end-June 2012, up 71 percent from five years ago.)

IMF staff expect general government gross debt to surge past RM700bn to top 55 percent in 2016-2017 based on present policies.

Which means whoever is elected to government in the coming general election has a real job to do to keep a lid on, if not reduce, the debt.

But even this government debt figure of RM502bn in 2012 tells only three quarters of the story. It does not include off-balance sheet debt or contingent liabilities (i.e. debts that COULD be incurred if something goes wrong or in the worst-case scenario as in the PKFZ scandal). Off-balance sheet debts include state government borrowings raised by bond issues.

Such off-balance sheet debt and contingent liabilites have doubled over the last four years from RM53bn to RM100bn now. Apart from matters related to Khazanah and Cagamas, contingent liabilities could include stuff related to 1MDB, Prasarana and Johor Corp, The Edge (22 October) quotes bond analysts as saying. 1MDB, for instance, has been issuing bonds to raise money to buy electricity power producer assets.

Also, as the KL MRT is not part of the government’s development budget, bonds issued by Prasarana to raise billions of ringgit for the MRT project will be regarded as off-balance sheet items – and not included as central government debt.

I moderated a forum yesterday on the coming general election. One of the participants from the floor wondered aloud if Malaysians would be fearful of voting for change in the coming general election given the uncertainty over whether there would be a smooth handover of power if the ruling coalition loses after 55 years in power.

But then another participant said people now are even more fearful of the country’s growing level of indebtedness and the massive corruption and this fear alone would trump all other considerations when they go out to vote. We saw an early indication of this overriding concern in the phenomenal turnout at the Bersih 3.0 rally, when people put aside their fears despite knowing there could be heavy-handed police action.

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Aidil Yunus

We are well on the way to being Greece. When sinking global economy hits our shores our factories and jobs will go bust and then our artificial purely speculative property bubble will go bust which in fact is another Genneva ponzi scheme in disguise. And then as the banks go bust. .again there will be a scramble to save our Genneva banks for the umpteem time..because all will say we need to save the banks so that they can start lending so that buisnesses can start up to create jobs again.. In Malaysia this is a blinking fallacy because our… Read more »

Gerakan K

Yes, very few businesses in Kelantan due to pas administration. Don’t talk about FDI. It is virtually ZERO. But Malaysia in total is growing moderately each year despite global uncertainty. The ever increasingly tax income is a proof our economy is quite well.

tunglang

Yes, much have been debated about O’Blady banks BUT there are many bank door lickers who will vehemently cry blood, cry tears at the mere mention of banks which have to make profit (exceedingly) at all cost. As for entrepreneurs, unless one has strings to pull from the back doors of banks, nothing will happen even if a business plan has good credentials & promising revenue based on past records. Kia Su, Kia Si, Kia Liao, Ghing Hang Hor Lang Gin. Don’t blame the flourishing of Ah Longs at every lamp post & Telekom distribution box. They at least take… Read more »

tan tanjong bungah

Hi Gerakan K,

It seems you don’t understand the statement ‘ … this oil field is “majority-owned” by them … ‘, “majority-owned” here is meant to be sarcasm!! LOL!

Petronas is govt-owned and directly under the PM, even the cabinet has no access to its accounts, but the custodians, i.e. UMNO Baru PMs since Dr M’s times, have dispensed its funds for many bailouts of UMNO-connected, BN-connected and crony-connected companies as if it is their grandfathers’ money!!

So, don’t talk about spinning when you are so lame! Who’s ‘tak malu’?

Andrew I

If he knew malu, I would vote for BN.

Gerakan K

@tan tanjong bungah, it is good that you have admitted your mistake, i.e. Petronas is actually owned by the federal gomen. I’m happy that my response has waked you up to the FACT. Also, you have to know Petronas is not a Sendirian Berhad or listed company. So don’t use similar operating principles to Petronas. Finally, the AG is there to check everything, from HIGH CLASS screwdrivers to non-existence purchases. So, what you hear is just a malicious propaganda.

tan tanjong bungah

Hi Gerakan K, Are you that LAME? I have never made the mistake of saying Petronas is not govt-owned; don’t pride yourself that you woke me up!! You are the one in SLUMBER land or pretending to be so! All along I have been fully aware that Petronas is govt-owned, that only the PM has access to its accounts, other cabinet members, including the DPM, do not have access to Petronas accounts, let alone the public! ” … Haven’t the previous two PMs and current PM squandered away all the riches of Petronas! They treat Petronas money as if it… Read more »

Yang

Gerakan,
If you are so ignorant just keep your mouth shut up otherwise nobody will say you are one dumb guy.

Petronas is a Bhd, a listed company with the majority of shares owned by the govt.

Expensive screwdrivers is not a malicious propaganda. Here you are either ignorant or a big liar.

Its in the Auditor Report.

Gerakan K

@Yang, Petronas is a special entity governed by special law. You think any company can SUKA SUKA korek minyak kah ??? Ask your nearest lawyers for detail. Or ask SSM that you want to form a company to KOREK MINYAK. Please ensure you have THICK SKIN before asking SSM (ha ha ha hee hee hee ha ha ha hee hee hee !!!)

Yang

Thaksin and many others use their own money not the RAKYAT MONEY.

You use your own money to buy the football club, we don`t give a damn. The problem is Ah Cheap keep using our`s the Rakyat money.

Gerakan K

@Yang, national level promotion is important. See our F1 contribution not only to tourism, but also to our nation image as well. Few billions is nothing for a country like us if you consider the long term benefits gain from it.

Yang

Gerakan,
Dont keep lying and spinning. National level promotion is ok but not ok when money goes into their pocket dude. And of course not a few billion. Ten of millions is already a luxury such as APCO promoting for their self and party benefit dummo

vk95

Gerakan hope your bn government use that billions on providing free educations rather then extravagant show offs ok.

Gerakan K

COMMENT UPDATE: Let me repeat, our Petronas and co. have found a new oil field. So, no problem for another dozen angkasawan. If I were the PM, I will buy a football club in England and use it as a promotional tool for Malaysia, just like other nations.

Andrew I

Wasn’t Petronas Twin Towers supposed to have been our promotional tool? We’re still north of Singapore to many.

tunglang

No, that Petronas Twin Towers is an extravagant phallic symbol of an ego gone (wrongly) over-erection. And it has cost a hefty price on us foolish tax payers of misplaced faith on an ApaNama Sickness that knew no pains of blood, sweat & tears labor to put Ah Kong’s monies into a coffer ripe for the leaking & gaya-raya spending.
If we can sell this towers like a Lego (dismantled), let’s do it overnight with honor & thick face, black heart.
No apologies, unlike Obama.

Yang

Yeh our Petronas found new oil field and yet we and our country are still so poor that we are indebted to a tune of 503 billions and will soon be bankrupted Singapore without resources and oil field are the richest in the world. What should we do. Make the change and kick out these corrupted AMMO Barang Naik together with their cronies and sycophants from the Malayan Corruption Agency, Gilakan and Malaysian Indebted Congress. Yes let`s not forget we also do not want pornstar, adulterer, corrupteurs, scandals any sin you name it that they will do. Yes lets also… Read more »

tan tanjong bungah

Hi Gerakan K and everyone, Yes, we discovered an oil field off Pahang. Good for Malaysians, but of much, much more good and worth to UMNOputras, BNputras and their cronies as this oil field is “majority-owned” by them and held in trust (??) for the people!? VULTURES are in glee, waiting to pounce on the riches of this oil field! Any wonder why Gerakan K is so elated in this find? I am also a little glad as the oil field only serves to delay a little bit the advent of bankruptcy of the country!! Haven’t the previous two PMs… Read more »

Gerakan K

Some people are a bit slow in absorbing information and easily cheated by pakatan propaganda. Let me help you, our Petronas money belongs to federal gomen and that petrol money used to subsidize your daily needs eg: petrol, sugar, flour, cooking oil, cooking gas, etc.

So be grateful when eating something like teh tarik, roti canai, or when travelling and cooking.

Where do hear that Petronas money belongs to “UMNOputras, BNputras and their cronies ” ??? This is your own statement. You think Petronas = Sendirian Berhad kah ??? Please don’t spin it until out of control. Malu tau ???

Yang

Some people are real stupid. Sure we know Petronas money is the people money or the Federal govt money. If it is use to subsidise the people, its ok. Now even with these huge sum they are cutting on subsidizing. Instead they are bailing out their cronies. Understood ???? and using it for projects at mark up prices such as the Scorpene, patrol boats and many others.

Yang

Sure we can’t compare with Korea. In the 80s our GDP were higher than them. Now they are higher then us 3 times.

Oop we can sure compare with North Korea
Our pace is same as them.
Move forward slowly, safely and more importantly, we move forward together !!! and just like UMNO BN autocratic controlling the people

Gerakan K

@Yang, you need to be think DEEPER. If the gomen is not push everyone to move forward via policies, subsidies, assistance, etc, some will move forward very far (maybe the elite chinese ???) and some will move backward very far too. Just like current Penang. Some will easily buy houses in million-ringgit range and some even cannot buy houses within 400k-600k range. They need low cost houses. If situation like this continue for a long time, we cannot guarantee the stability. Under BN inclusive policies, everyone is not left behind, particularly the kampong folks. That is why BN is exceptional… Read more »

moot

Those euphoria getting Jibjib handout rarely think how the money pay out. It is true that nation will not bankrupt, because the money printing mint is already “government backing” rather than gold-backing, thus AKA passing inflation to the people.

So the hundreds handout, will catch up by excessive supplies of money – inflation. Award winning bee-and-em Zeti just run the national mint and say nothing wrong with it.

Gerakan K

CORRECTION:

It means nothing if the government is rich (has surplus) but their citizens are poor. Take Penang for example. Yeah, the state has surplus but ordinary Penangites can’t even buy a house. Don’t make Penang for rich locals and foreigners only !!! How about the ordinary ones ???

Yang

Ya and the rakyat have to suffer with rising prices and debts. The court declared Kg Buah Pala now owned by the developer and can develop the land. Look LGE PR negotiated a 750k house for these residents FREE OF CHARGE (FOC) Yes FOC Look at KL Sentul, Ah Cheap 1 Malaysia The High Court in Kuala Lumpur has granted vacant possession to the site Kampung Railway, Sentul, to a subsidiary of YTL Corporation Wow these resident were now force to be evicted. Hey hey Ah Cheap please compensate us with a house. Ah Cheap say good good My 1… Read more »

Gerakan K

Dear king kong, Gerakan K is here unless he is intentionally hiding in Genting Casino (not kidnapping!). As usual anil will scare readers with national debts in order to promote pakatan. But, anil also never question the costs and funding of BUKU JINGGA plan by pakatan. Funny, isn’t it ??? What legal threshold ??? Look at the USA lah. Legal rules are designed by human (MPs) and also can be altered by MPs. Then look at our national incomes and expenses. Do you know that our Petronas and co. have found new oil field ??? Yeah, let’s celebrate. Hidup Petronas… Read more »

SunnyOoi

Yeah, you will never know if petronas find more oil. But you surely know every year income tax increase. Hidup BN!

najib manaukau

What else can anyone expect ? After all this is one of the many reasons why the … the shenanigan Mahathir ‘retired’ from politics. He had squandered… and left nothing for his all those who became P.M.. He can now claim he did not leave with an empty national coffer when he ‘retired’. But we all know better and how he (allegedly) manipulated with all the money Petronas had, to reflect how well he had managed the nation’s coffer. When the truth all the P.Ms. after him was truly left with nothing and even had to cancel some of the… Read more »

king kong

Gerakan K – It would be good to hear your voice on this matter. Afterall UMNO_Gerakan Federal is spending the money like Sailor on shore. Or you have lost your voice and to shy to say?

bigjoe99

There is one analysis about this issue that is seldom discuss partly because its require some speculative extrapolation. In terms of percentage of GDP, the change has been less dramatic. This is because the govt revenue has increased – largely due to rising oil prices – not a reliable future growth or long term renewable. What it means that eventually this debt must be paid off with TAXES especially the new ones that are coming online like MRT corp which has almost a zero chance of being profitable like Rapid/LRT are now. Taxes and higher costs are certainty with UMNO/BN… Read more »

tunglang

in business terms, a zero sum game is not the best option as a seller in a B2B dealing. Here, as voters who can change the zero benefit of a leeching gomen should wake up & change the status quo – of being leeched to the bones.

Gerakan K

Just a quick response to your comment. Answer me what are PR1MA and BR1M now ??? No google please. It is for average joe by BN administration. Please ensure you have adequate information before commenting.

bigjoe99

PR1MA and BR1M are the bait in ‘bait and switch’ – the switch being higher taxes, higher utilities, AES, toll, health care,

Phua Kai Lit

One more switch item — GST (Goods and Services Tax)

tan tanjong bungah

Hi everyone. Just 1 to 2% of the contingent liabilities turn bad would tip the federal govt debt over the 55% threshold, and Malaysia would be another Greece! This debt is not just borne by present Malaysians, but would be passed on to the unborn generations! When austerity drives are forced to be carried out by the Federal Govt to ward-off bankruptcy, development expenditures would be reduced and cuts in administrative expenditure would likely see the civil servants’ salaries and perks either undergoing a freeze or cuts! These measures, despite the higher cost of living with rampaging inflation, would definitely… Read more »

Sahril

Syed Mokhtar’s group of companies has a combined debt of RM34.3 billion which is 10% of all local corporate bonds as of 2011 with only RM7.8 billion cash as of May 2012. Syed Mokhtar now controlled power, water, port, rail and toll businesses as well as national carmaker Proton with billions in government-guaranteed debt. In comparison, debts raked up by Renong, led by Tan Sri Halim Saad, was about RM20 billion or 7% of loans in the banking system 14 years ago, far less than the risk posed by Syed Mokhtar’s four listed entities. We should not forget that Renong’s… Read more »

Phua Kai Lit

Frontman for others ??

tunglang

Went to the supermarkets, queued up & this was what I observed most of the time: the trolleys of some ‘type of customers’ were filled up to the top with all kinds of food luxuries + groceries. These folks I surmised were makan-gaji kerajaan who could afford the ‘good’ life while it lasts & lasts (as long as this kerajaan is voted in place). 2011 Statistics: Malaysia’s civil servants to population ratio was 4.68, in comparison to Indonesia’s 1.79, South Korea’s 1.85 and Thailand’s 2.06. The size of Japan’s civil service was similar to that of Malaysia’s despite having a… Read more »

tunglang

Saving the young from bankruptcy.
Solution:AKPK, a God sent public service.
http://www.thesundaily.my/news/533840
If you have spent till the edge of bankruptcy like our gomen, it’s high time to seek help. Seek AKPK.
Sorry, O’Blady banks. You are part of the problems.

Adiba

This is a good book for those who overspent on wants instead of saving for the future:

Aidil Yunus

Dedikasi untuk Najib yang buat Malaysia banyak hutang dan membebankan masyarakat akan datang:

tunglang

Fear Factor has always been the mental block of those who cannot stomach the uncertainty of future. The way BolehLand is cruising to the Deep Blue Ocean Strategy of Beggars, we the right thinking Rakyat should not pause too long to vote wisely to avert sinking – ship, lifeboat, compass, line, sinker & anchor.
Who wants a BUMMER or ‘HUMMER’ (tainted, corrupted) captain of our future?

Stephen

I urge everyone to watch this video…

JasOne

This is another well-made video to depict our sejarah since Merdeka:

Selamatkan Malaysia!!!

ps: Anil could possibly post it as a new topic to generate follow-up discussion.

Aidil Yunus

Anyway, most of the items in the video are ignored by our school syllabus in Sejarah. But it is a job well done to expose the hidden truth.