Government is committed to debt consolidation plans

WITH a targeted debt-to-gdp ratio of 50% in the medium term, the government is committed to its debt consolidation plans.

The 2020 Fiscal Outlook and Federal Government Revenue Estimates report said the establishment of the Debt Management Committee (DMC) would be instrumental in guiding policy direction and strategy, while the Debt Management Office (DMO) will ensure smooth implementation of measures to bring debt down to a more manageable level.

“Hence the government will improve its processes and tighten procedures for a more coherent execution of effective debt management. These efforts will anchor positive market expectations and ensure Malaysia’s longterm debt sustainability,” according to the report.

The DMC and DMO were both set up in May this year. The DMO is aimed at enhancing the processes and governance of the overall debt and liability management, while the DMC was set up with the main objective of formulating a sustainable debt management policy by reducing debt in the medium and long term while minimising risk exposure

As at end-june 2019, government debt stood at Rm799.1bil or 52.7% of GDP, below the self-imposed limit of 55%.

Looking ahead, the government expects its gross financing needs in 2020 to be primarily sourced from the domestic market and remain below the IMF’S threshold for emerging economies.

Efforts to deepen the onshore market, through higher issuances of domestic papers to improve liquidity, will continue.

Likewise, the need for offshore borrowings will be based on favourable cost at acceptable risks and global financial market condition.

In conclusion, it said, the government remained committed towards efficient debt management to ensure that borrowing made would increase the economic capacity and benefit future generations.

The government would continue to finance its debt domestically to strengthen the capital market, especially through higher issuance of syariah-compliant instruments to further promote Malaysia’s position as a hub for Islamic finance.