Written by Chua Sue-Ann
Tuesday, 08 June 2010 22:40
KUALA LUMPUR: Prime Minister Datuk Seri Najib Razak assured the Dewan Rakyat on Tuesday, June 8 that Malaysia would not face similar difficulties as debt-ridden Greece because the country had been successful in maintaining its debt at a manageable level and had taken steps to reduce its borrowings.
In a written reply to Lim Kit Siang (Ipoh Timur-DAP), Najib said the federal government would continue to responsibly plan, monitor and control its financial position to ensure that the government's debt and deficit levels would not spiral out of control.
"Deficit levels are expected to fall and debt levels are expected to be continually controlled for the medium and long term.
"These efforts will continue to ensure that the federal government's debt and deficit levels will not rise to a point where it affects the country's capability to repay the debts," said Najib (Pekan-BN).
Najib's statement comes after a strong reaction to a recent statement by Minister in the Prime Minister's Department Datuk Seri Idris Jala who warned that Malaysia could go bankrupt in 2019 or "be another Greece" if the government did not slash some RM74 billion in annual subsidies.
According to Najib, the country's total debt in 2009 fell to RM233.92 billion from RM236.18 billion in 2008 despite a slight increase in the ratio of national debt to gross domestic product (GDP).
Najib attributed the drop in total debt to a net repayment of medium- and long-term debts by the federal government and private sector. He added that the ringgit's stability against the US dollar had also contributed to the decrease in foreign debt as a whole.
Najib, who is also the finance minister, noted that the country's debt to GDP ratio from 2004 to 2009 remained manageable at an average of 34.6%.
Based on the figures cited by Najib, the debt to GDP ratio was at 42.3% in 2004, 37.8% in 2005, 32.1% in 2006, 29.2% in 2007, 31.9% in 2008 and 34.3% in 2009.
The government will continue to manage foreign debt in a prudent and pragmatic manner, ease diversification of foreign borrowings by the private and public sectors, minimise the large risks related to foreign obligation and ability to service loan repayments, Najib said.
Najib also said the private sector would only look to overseas borrowings to finance productive economic activity capable of generating foreign currency receivables to repay loans.
The prime minister also outlined the specific steps taken by the federal government to reduce the country's foreign debt:
1. The government's current policy is to emphasise domestic borrowing that does not contribute to inflation. This is due to high liquidity and cheaper borrowing costs of domestic markets.
2. Foreign debt management will be supported by a comprehensive debt monitoring system to encourage monetary and financial stability while preserving the balance of payments position. This is to enable early detection of risk and weaknesses arising from exposure to foreign debt as a whole.
3. In line with the aim of consolidating our fiscal position in stages, the 2010 Budget places emphasis on several steps to enhance effectiveness and efficiency of government revenue and spending. The government is studying proposals to restructure fuel subsidies which make up a large part of the government expenditure.
4. To continuously defend the country's fiscal position without affecting the aim of comprehensive growth and development, the government will also intensify public-private partnership programmes for several high-impact projects including high-speed broadband projects, development corridors and public transport infrastructure.
5. To strengthen revenue flow, the government is working to introduce the goods and services tax (GST). Through GST, the government's base income would be enlarged and would be more protected from the fluctuations in oil prices.
http://www.theedgemalaysia.com/political-news/167551-malaysia-wont-go-the-way-of-greece-says-najib.html
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