‘GOVT DEBT REMAINS WELL-MANAGED, MODERATE’
Government will not breach debt-to-GDP limit of 55pc, ministry tells Dewan Rakyat
PRUDENT fiscal consolidation has moved the federal government debt to gross domestic product (GDP) ratio away from its selfimposed 55 per cent debt limit.
The debt, which has been on a declining trend from 54.5 per cent in 2015 to 52.7 per cent last year, stood at RM685.1 billion, or 50.9 per cent of the GDP, as at the end of June, according to the 2017/2018 Economic Report.
“Of this amount, 96.7 per cent, or RM662.4 billion was domestic debt (49.2 per cent of GDP) while 3.3 per cent, or RM22.7 billion, (1.7 per cent of GDP) was offshore loans.
“The federal government debt remains well-managed and categorised as moderate,” said the Finance Ministry in a written reply to the Dewan Rakyat on Thursday.
Government debt (also known as public interest, national debt and sovereign debt) is debt owed by a government.
“(There is) nothing wrong with loans made for the nation’s development, infrastructure, the good of the people, as well as to stimulate the econ- omy.
“In the longer term, the result- ing economy will be able to pay over a period of time,” said Sec- ond Finance Minister Datuk Seri Johari Abdul Ghani in an interview on TV3’s “Soal-Jawab” programme recently.
He said growth did not come at the expense of the government’s fiscal position as Malaysia’s economic activities today were driven by the private sector.
The private sector led in the development of tolled roads and infrastructure such as the mass rapid transit and light rail transit, which were spearheaded by companies that borrowed for returns in the future, said Johari. To ensure the federal government’s debt limit remains low and manageable, the country’s fiscal consolidation plans are expected to be continuously executed to reduce the deficit in phases.
The fiscal deficit for next year is targeted to be reduced to 2.8 per cent of GDP, or RM39.8 billion (2017: three per cent; RM39.9 billion).
Accordingly, the federal government debt would remain within the 55 per cent GDP limit, he said.
Thus, the government was on track to achieving its target of a fiscal balance by 2020, as spelt out in the National Transformation Programme, said Johari.