Has government debt exceeded the 55 per cent ceiling?

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Source: The Edge, 15-21 June 2015

What does Greece have in common with Malaysia? The 2004 European football champions just got beaten 2-1 by the “fishermen, road constructors and carpenters” from the Faroe Islands, minnows in world football.

Malaysian football has also crashed down to earth with a thud. In the 1970s, Malaysia used to vie with South Korea and Iran for Asian football supremacy. Just a few years ago (2011), Malaysia were crowned Sea Games football gold medalist. These days, they are struggling against the likes of Timor Leste. And only days ago, they received a six-of-the best drubbing (0-6) at the hands of Palestine, not exactly a football superpower!

On the economic front, Greece is staring at an exit from the European Union while Malaysia is waiting with bated breath for the latest rating from Fitch.

The Malaysian federal government’s debt position should be cause for concern.

We keep getting told that the Malaysian federal government’s debt to GDP ratio is below 55 per cent. But is this debt ratio meaningful when it excludes growing government debt guarantees, off-balance sheet obligations and perhaps debts owed by GLCs?

Let’s look at our government debt. The figures are from The Edge (15-21 June 2015).

Government debt (end-March 2015) RM597bn (53.4 per cent of GDP)
Government debt (end-March 2012) RM471bn

Government debt guarantees (end-March 2015) RM173bn (does this include debts of government-controlled GLCs?)
Government debt guarantees (end-March 2012) RM130bn

Total public debt and debt guarantees RM770bn (69.6 per cent of 2014 GDP or 65.9 per cent of projected 2015 GDP of RM1.2tn)

On 9 June, Parliament was told that Putrajaya has to absorb off-balance sheet obligations or payments of RM4.8bn-RM11.6bn a year for nine companies owned by the Finance Ministry (including Pembinaan PFI Sdn Bhd and Pembinaan BLT Sdn Bhd. What exactly is this? Interest payments or debt repayments? Why should the federal government be paying this instead of the firms involved – unless these firms are running huge losses?

And what about the consolidated public sector financial position, whose deficits have been rising over the last three years?

And where do the 1MDB government guarantees fit into all this?

Oh, by the way, Greece’s government debt to GDP is widely believed to be 177 per cent (which means we are nowhere close to Greece, if that’s any comfort) – but some actually believe it to be 68 per cent if a different accounting system is used (which may not be so comfortable after all).

All said, our 55 per cent threshold looks rather meaningless when we are not getting the full picture of the government’s exposure to all potential debt. Elsewhere, household debt is now 86 per cent of GDP, corporate debt 95 per cent of GDP, and external debt 69 per cent, which is not great news either.

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dinesh

The latest BN’s spin by Jasa’s Puad Zarkashi is that the national debt of RM744 billion would include debts of the private sector, public companies and individuals base on his new method of debt calculation.

gk ong

Economy is bad, many people have lower purchasing power other than in debt.

Sad to see a certain prominent blogger (once a reader of anilnetto.com) has to set up garage sale on his blog to sell his luggage bags, possibly to make ends meet?

Ananars

What the heck are you complaining when Anil did not. Like you said time is hard, so are you so heartless or plain jealous he could make some money. We know you are loadful or how else do you have the time to spew garbage here

tunglang

Someone is “ke-po” meaning busybody about other’s business.
Niao Kong’s teachings?

gk ong

Time is not hard on people?
Now rakyat can no longer enjoy Menu Rakyat 1Malaysia as Nanyang on its frontpage headline reported today that most of the restaurants offering such menu have closed shop as business could not be sustained by barang naik of food cost:

http://www.nanyang.com/node/709141?tid=794

tunglang

If you think in terms of costs of food as a sole reason to close shops, you are ignorant. There are myriad of reasons, one of which has more financial implications i.e. rentals. The skyrocketing rental charges the pass 3 years have contribute to doing business, earning pittance. The reason for such high rentals? You & I know very well the spiralling price trend of properties created by greedy developers to justify building more high-end properties (inclusive of business ones) affecting all type of rentals. Even haunted prewar shop houses can call for Rm2K rentals if you care to try… Read more »

MAT MARVEL

Niaokong blogger?

tunglang

Since the economy is already so bad, can Niao Kong do a 1st for Penang of helping Penangites to own affordable housing by converting the present high-end condos to much more affordable properties???
Since property sale is so bad, Niao Kong can think out of the box to persuade greedy developers to sacrifice profit margins. Otherwise, the corporate-politic tango may go awry in the months to come with no takers for these properties built for the rich & famous of developers’ marketing fantasies.
Can or not, Niao Kong???

dinesh

More important for Penangites to upgrade themselves with good skills that could command them high paying jobs. No need to complain and hope for miracle to happen.

tunglang

Affordable housing is a pressing social issue. Don’t confuse with incomes which may take a long time to upgrade. Get real.

Ed G

If property sales is so bad with no takers for properties built, the greedy developers would be left with the choice of reducing their profit margin by selling at a discount or experience a cash flow problem or even go bust. Likewise, the property owners would have to reduce the rentals or face with empty unrented properties. Businesses and traders should be able to reduce their prices in view of lower cost and entry of new competitors. The invisible hand of market forces should be able restore order of the open market. Unfortunately, this scenario is what the economists and… Read more »

gk ong

According to a recent survey by Jobstreet,about 90% of the Malaysian workforce can’t cope with the additional expenses incurred following the implementation of GST.

dinesh

The survey also indicated that most people would cut down on dining in restaurants because of GST. This would in turn affect the business of F&B and ultimately the economy.

Don Anamalai

The ringgit has been steadily climbing towards the MYR3.80 per dollar peg, last seen in July 2005. Bloomberg TV Malaysia’s Sophie Kamaruddin and Han Tan compare the currency’s movements then and now, along with recent rhetoric from analysts and Bank Negara.

Yang

Putrajaya will cooperate with Thai authorities with the aim of taking action against The Edge Media Group and whistleblower website Sarawak Report.
http://www.malaysiakini.com/news/302980

Some nitwit keep talking of sue but indictment would be more appropriate. Its about tampering of records, fabricated and doctored documents, spreading of lies and deception and a party to fraud. Nothing to do with defamation. Anyway the PM has already sued Tony and should do what its more appropriate to others like Lafizi.

The Hunter turned hunted
http://www.malaysia-today.net/mahathir-the-hunter-turned-hunted/

gk ong

If the data was tampered with, why only realize it now? Shouldn’t you have known the moment the information was released, and refuted pretty much right away?

Yang

GK : I think you are a real nitwit or an obsessive sycophant. The Swiss has been arrested and he has admitted to the doctoring, falsifying and tampering. Sarawak Report and the Edge received those report and they may or may not know but they should have verified it before reporting. Did they knew about these tampering, falsifing and doctoring or are they in COLLUDE with them to print out these stories knowing that it may have been false or tampered. Like I said check out who is the boss of Edge and how he is related to the defacto.… Read more »

iSupercally

gk ong; The PM and govt have rejected and denied any wrong doing on the allegations from Rafizi, Tony and the Mahthir of which these stories were obtained from Sarawak Report and the Edge. Shouldn`t Sarawak Report and the Edge have known that the data have been tampered the moment the information were released to them. Yes they should have known right on spot that all these stories are fabrication and being tampered or doctored. Why did they continue to print it knowing it is such. Now that the truth have come out, does it mean that they have been… Read more »

gk ong

Wonder why those niao chus did not squeak when the Sarawak Report first exposed the news?

freebird

Not ruling out the possibility the involvement of the Malaysian government, Tun Mahahir said that “very clever propagandists” were hard at work to “blacken” his face. “What makes me puzzled is that he didn’t commit a crime in Thailand. He committed the crime in Saudi Arabia. Usually, other countries don’t care unless he is a terrorist

iSupercally

Hello GK Ong, Where are you all this while. Have you been sleeping in your cocoon. Did you not hear the PM and minister after minister denying and rebutting. or has you gone `Lou Ngoi Chi Ngoi Seng` schizophrenia

Yang

Anil The meaning is next to it. “`schizophrenia““

Phua Kai Lit

A drowning man will clutch at a straw. Ho, ho.

1MDB thieves and their sycophants (can I borrow this favourite word from Mssrs. Yang and
Supercally since they like to use this word so much?) will clutch at any available straw. 🙂

iSupercally

Phua : I am not interested in slogan. I am interested in reality.

Yang

1MDB: Truth at last
Writers who slammed the Prime Minister and 1MDB officials have never bothered to check the authenticity of the documents, preferring to discredit our authorities instead.
http://www.freemalaysiatoday.com/category/highlight/2015/06/24/1mdb-truth-at-last/

So the next time when opposition and their sycophants start talking, please check out with reason logic and authenticity those news and documents those rocket jerks have been filling us with that are tampered and not truthful coming some unsubstantiated report like the Sarawak Report and WSJ.

gk ong

If the emails were tempered with, why didnt PSI sue Sarawak Report?

MAT MARVEL

1MDB = satu masuk duit banyak

gk ong

The report in the Bangkok Post stated that the matter is still under investigation. So, how did our Home Minister come to the conclusion and made the inference that it is a fact that the emails had been tampered with? Isn’t that premature?

iSupercally

Why did the Home Minister come to the conclusion when it is still under investigation. GK Ong, you are right on spot again. But like a true Pakatoon dunggu, you did not want to know or ask why did the Pakatoon duo and M keep on alleging and accusing the PM when it is only a report without a shrewd of evidence. Isn`t that premature to accuse without substantial evidence but just from some media stories. Are they in collude with the 2 media to create and fabricate stories about the PM ???. Next time please don`t jump to conclusion… Read more »

freebird

If 1MDB can be blackmailed, no matter how or by whom the information has been altered, it still doesn’t change the fact that 1MDB has been blackmailed because they knew they have something to hide. The allegation against 1MDB will not vanish just by the arrest of Justo.

Phua Kai Lit

Of course, the regime can meet its local debt obligations — it will be done at the expense of the ordinary people i.e. through more taxes (e.g. the GST), floating more bonds (which it has trouble selling) or through “printing more money” (money creation, which increases the rate of inflation). I guess the Yangs of Malaysia don’t mind paying more taxes to a corrupt and wasteful regime and having their life savings eroded by accelerating inflation? As for the official financial and economic data from the regime, you can choose to believe that they are reliable or not. I don’t… Read more »

Ed G

Obviously the government has learnt from the 1997/98 financial crisis by keeping its debts mainly domestic in order that the debt can be paid simply by the ‘creation of more Ringgit out the thin air’ should there be a short of cash. Unfortunately, this practice would eventually depreciate the value of the currency. Probably many of the foreigners and ‘rich, well-informed or connected’ locals who are sensing this situation with the huge drop in the price of petroleum. They are taking preemptive action by selling off the Ringgit thus bringing about the recent slide in the value of the Ringgit.

Phua Kai Lit

The regime is also raiding your EPF retirement savings and your govt pension scheme etc, folks.

bigjoe99

Malaysia debt levels is described as “manageable”. It really is not anywhere in crises. Its not the issue. The issue really is where do we go from here? The debt levels – both govt and private have risen despite the fact we have had of of the best growth period. Debt can either BE FUELED by growth or ITSELF FUEL THE GROWTH.. If there are good projects and good prospect, debt is good and fuels growth BUT if there are no good projects, then debt is the one fueling the growth.. Its likely under Najib the picture is a mix… Read more »

JJ

Good post Bigjoe !
Are you the brother of BigJohn in the famous High Chaparral ? Hahaha !

gk ong

I do not trust those ‘feel good’ (more like syiok sendiri) data provided by Bernama or BNN on NST, TV3 and Awani. They are merely half-truth to appeal to thise ignorants ones not seeking the truth due to inability to comprehend other languages other than BM.

glissantia

The percentage itself is not the main issue. An leading economist just wrote that after WW2, the ration in some countries was around 200%. They used the debt for productive expenditure that increased growth. Here, secrecy, cronyism, racism, incompetence, gullibility and dereliction of duty (supervision) mean that the public are burdened with useless debt.

MAT MARVEL

One electronic chain in Penang learns from jibbie administration by using sales slogan = Pakai Dulu, Bayar Lepas Raya.
Country debts compounded by personal debts, bankrupt?

ktwong87

Reminds me of the ad used by a leading credit card issuer – encouraging folks to buy big-ticket items which were beyond their means for their loved ones by using their credit cards. “Now you can show your love” was the tag-line if I recall correctly. Promoting a most irresponsible attitude towards debt, especially with the high interest rates charged by credit cards. But are the tactics used by 1MDB and all the assorted deals any better? I fear that not only my son’s generation will end up paying for debts arising from the Finance Minister and his “brilliance”, but… Read more »

gk ong

Deputy Finance Minister has told your son to prepare and cook nasi goreng at home, and not to eat out.

freebird

Ahmad Maslan-Nasi Goreng Tanpa GST & Top Up Explained+Public Response

Yang

Check out who is the owner of the Edge and how he is related to the defacto before reading all his stuff of deception especially from oversea unsubstantiated sources. Malaysia govt debt against GDP is about 52% compare it to UK 89.4%, US 101%, Netherland 68.8%, Spain 97%, Italy 132%, Euro areas, 91%, France 95%, Germant 74% & Japan 230%. A small percentage does not means that the country is good. Look at some of these countries. they are worse than us. Are they going bankrupt. What is more important is sustainable growth…
http://www.tradingeconomics.com/malaysia/government-debt-to-gdp

Yang

Unless there is a political crisis, the government can meet its debt obligations, says Dr Yeah Kim Leng. And its look like that the opposition is trying to create such a crisis to destablize the country for their own agenda. http://www.freemalaysiatoday.com/category/nation/2015/06/24/msia-still-has-money-in-its-pockets-says-economist/ ““Most of the government’s debt is in domestic currency so the government will not default on its domestic debt as it has the capacity to generate the cash.““` Is Phua Kai Lit or Dr. Yeah Kim Leng lying. Well I rather believed in the expert then some spin tale or cock and bull stories from some overseas sources and… Read more »

gk ong

Please teach your kids financial management to be prudent with spendind as many as 25,000 Malaysians from Gen Y, defined as those below age 35, have become bankrupts over the past five years.

Their inability to settle loans for cars, houses and personal loans or for being guarantors for other loan defaulters are the main reasons for the worrying trend.

Don Anamalai

Jim Rogers – investor, financial commentator and author, made enough money by age 37 to retire and travel the world. He thinks it’s important for children to learn about money early. What does he teach his own 11 and 6-year-old daughters?

Watch this “Jim Rogers’ Money Lessons For Kids”:

Phua Kai Lit

If your big public debts are owed mostly to foreigners, denominated in hard currency,
and have been accumulated and the funds wasted through corruption (rather than used for
productive investment), then you are in big trouble like Greece!

No amount of “Yanging” and “Supercallying” can hide these true-isms. 🙂