World Economy

Malaysia Says Debt Below 55% of GDP

Malaysia’s economic activities are driven by the private sector.Malaysia’s economic activities are driven by the private sector.

Prudent fiscal consolidation processes seem to have moved the federal government debt to gross domestic product away from breaching its own self-imposed 55% debt limit.

The debt, which was on a declining trend from 54.5% in 2015 to 52.7% in 2016, stood at RM685.1 billion ($161.73 billion) or 50.9% of the GDP as at end of June 2017, according to the Economic Report 2017/2018, Bernama reported.

“Of this amount, 96.7% or RM662.4 billion was domestic debt (49.2% of GDP) while 3.3% or RM22.7 billion (1.7% of GDP) was offshore loans.

“The federal government debt remains well-managed and categorized as moderate,” the ministry of finance said in a written reply in the Dewan Rakyat, or house of representatives, Friday.

“Nothing wrong with loans made for the nation’s development, infrastructure, the good of the people, as well as to stimulate the economy. In the longer term, the resulting economy will be able to pay over the period of time,” second finance minister, Johari Abdul Ghani, said in an interview on TV3’s Soal-Jawab program recently.

He said growth did not come at the expense of the government’s fiscal position as Malaysia’s economic activities today are driven by the private sector. The private sector leads the development, for instance, of some tolled roads and infrastructure like the mass rapid transit and light rail transit, are spearheaded by companies which borrowed for future returns, Johari said.

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 level in phases.

The fiscal deficit for 2018 is targeted to reduce further to 2.8% of GDP or RM39.8 billion (2017: 3%; RM39.9 billion), and accordingly, the federal government debt will remain sustainable within the prudent limit of 55% of GDP.

Thus the government is on track to achieving its target of a fiscal balance by the year 2020, as spelt in the National Transformation Program. These developments will strengthen the nation’s economic fundamentals and resilience to further propel the country towards the milestones of a developed nation by 2020.

Beyond 2020, the government is looking to double the size of Malaysia’s economy to RM2 trillion by 2025 from the estimated RM1.2 trillion next year, and join the ranks of the top 20 countries by 2050.

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