PETALING JAYA: The Finance Ministry has clarified that the federal government’s debt level remains below the self-imposed statutory limit of 60% of gross domestic product (GDP) and only comprises the outstanding value of the Malaysian Government Securities (MGS), Malaysian Government Investment Issues (MGII) and Malaysian Islamic Treasury Bills (MITB).
“When the Finance Ministry reported that, as at end-2020, the statutory debt was RM820.7bil or 58% of GDP, and was projected to reach 58.5% in 2021, the government was referring to the legal definition which includes MGS, MGII and MITB as defined and provided for in the Temporary Measures for Government Financing (Coronavirus Disease 2019) Act 2020, ” Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz (pic) said in a statement yesterday.
However, if the country’s offshore and other borrowings are included, the federal government debt totals up to RM879.6bil or 62.2% of GDP.
Tengku Zafrul said both definitions are correct, but refer to different components of debt.
“Nonetheless, the government has always been consistent, in Parliament or to the media, in explaining that whenever statutory debt is referred to, it is always made up of MGS, MGII and MITB, ” he added.
In August 2020, the Parliament approved raising the statutory debt limit to 60% of GDP as compared to 55% previously, in order to provide ample fiscal room for the government to deal the Covid-19 impact on the
economy.
The last time Malaysia raised its debt ceiling was in July 2009 during the global financial crisis, when it increased its maximum borrowings by 10 percentage points to 55% of GDP.
Tengku Zafrul said the higher debt limit has enabled the government to disburse more direct aid to the B40 and micro small and medium enterprises, saving jobs through wage subsidies and supporting businesses.
“At the same time, the higher debt ceiling will also allow the government some buffer, particularly in directing additional aid to the rakyat who are worst affected, ” he said.
Looking ahead into the medium- to longer-term, Tengku Zafrul added the government remains committed to fiscal consolidation via the Medium-Term Revenue Strategy and Medium-Term Fiscal Framework.
“The proposed Fiscal Responsibility Act will comprehensively review and strengthen the medium-term fiscal framework by, among others, reprioritising spending, improving our tax framework, tightening enforcement and minimising leakages, ” he said.
Tengku Zafrul also said that if more debt is required to support the rakyat and businesses, its management is underscored by a firm and transparent commitment to fiscal discipline.
Source: https://www.thestar.com.my/business/business-news/2021/03/23/tengku-zafrul-debt-remains-below-self-imposed-limit