Debt level proves M’sia’s economy well managed — Expert

KUALA LUMPUR: The current level of the country’s debt proves that Malaysia’s economy has been well managed, according to local economic expert.

Harvard graduate Isham Jalil said this was true as the country’s debt was just 53 percent of Gross Domestic Product (GDP), below the maximum level of 55 percent.

“Malaysia’s external debt is lower than its internal debt,” he said in an interview posted on Facebook.

Isham, who is also Prime Minister’s Special Officer, also refuted the allegation that Malaysia would turn bankrupt due to the current level of debt.

“It’s a reckless thing to say that by the country will go bankrupt for having 53 percent debt of the GDP. Look at other countries, Malaysia’s debt is just about 53 percent, while Japan’s debt, for example, is over 100 percent (of its GDP),” he said.

Besides, he said the adoption of the maximum level of debt at 55 percent, an arbitrary level set in Europe 20 years ago, also showed that Malaysia had over-imposed itself as the level was no longer adopted nor adhered by other countries.

“Even Germany and France broke the rule when their debts surpassed 55 percent of their GDPs.

“So as Greece and Italy. Italy’s debt has even reached 80 percent. The European countries have no longer use the maximum level of debt at 55 percent, but we still impose it on ourselves, which is good,” he said.

“If you want to ask an economic expert on the most suitable level of debt a country should have or what is the good or bad level of debt, I don’t think anyone can give you the answer. Even if the country has zero debt, there must also be the pros and cons to it,” he explained.

Isham said what would be a problem for a country was when its external debt was too high, like what happened to Greece when it owed too much money to Germany that it was not able to repay.

“However, if we owe money to ourselves for the purpose of making investments to boost our economy, I think it is not a problem,” he said.

He said one thing about debt was that as long as the economy continued to grow, the debt could always be managed.

“If we don’t take loans, we might have financial restraints to make investments. That is why in finance and economic considerations, having a debt is not necessarily bad,” he added. - Bernama