AS the pinch from escalating cost of living is getting unbearable to ordinary Malaysians with each passing day, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz has rubbished claims being circulated on social media that Malaysia is about to become a bankrupt nation.
Stressing that the Federal Government’s debt is under control while the country’s fiscal position remains intact, Tengku Zafrul was more specifically allaying concerns that Malaysia could be the next Sri Lanka amid the country’s ‘un-rescueable’ soaring debt level (to put such concern in perspective, Sri Lanka defaulted on its US$51 bil foreign debt in April).
On Wednesday (July 13), Hulu Kinta’s PKR state assemblyman Muhamad Arafat Varisai Mahamad had claimed that there was little difference between Malaysia and Sri Lanka when it came to government administration and leadership.
“The Corruption Perceptions Index consistently ranks our country on the low-end of the scale due to corrupt government leaders. The country remains dependent on imported foodstuff, 90% of which comes from abroad,” he argued in a statement.
“The Prime Minister and ministers have poor management skills and are unable to govern the country well. The Government is not sincere and honest in helping the people by prioritising its self-interest.”
In his defence, Tengku Zafrul noted that 97% of the Federal Government’s debt is ringgit-denominated, hence reflecting Putrajaya’s prudent debt management as there is minimal exposure to foreign exchange risk.
At the same time, he said the External Borrowing Act 1963 provides that Malaysia’s offshore borrowings cannot exceed RM35 bil. As of end-June, these borrowings totalled RM29.4 bil.
With regard to the Provisional Measures for Government Financing Act (Coronavirus Disease 2019 [COVID-19]) (Amendment) 2021 which stipulates that the statutory limit of government debt shall not exceed 65% of its GDP said Tengku Zafrul said as of end-June, this debt stood at 60.4% of Malaysia’s gross domestic product (GDP).
“High debt level does not mean the country is at risk of bankruptcy. Various international rating agencies such as S&P Global, Fitch, and Moody’s, constantly assess a country’s debt level along with other factors such as prudent fiscal framework and governance,” he assured.
As Tengku Zafrul remained adamant that there is nothing alarming about the current state of Malaysia’s economy, the ringgit ended at its lowest since March 2020 against the greenback yesterday (July 14) amid fresh recession worries after the world’s largest economy reported inflation hitting a 40-year high in June.
This came about as US consumer prices surged by 9.1%, a significant increase from 8.6% in May with the market now predicting a 100-basis points (bps) hike in interest rate this month from 75 bps previously.
Additionally, the ringgit also ended lower against the Singapore dollar at 3.1717/1732 from 3.1559/1582 a day earlier as the Monetary Authority of Singapore (MAS) boosted its support for the Singapore dollar in an off-cycle policy decision in a move to curb inflation.
It remains to be seen whether Tengku Zafrul will be able to convince the masses that the Malaysian economy remains in a tip-top condition especially as the latter is seemingly not well-insulated against vulnerabilities of external shocks and inflationary/recessionary pressures. – July 15, 2022
