Govt to raise RM135.7bil in gross direct debt in 2019

The remaining amount of RM52.4bil will be utilised for the government’s development expenditure such as roads and infrastructure as budgeted and approved by Parliament in December 2018, stated Finance Minister Lim Guan Eng in a statement yesterday.

PETALING JAYA: The government will raise a total of RM135.7bil gross direct debt in 2019, of which 61%, or RM83.3bil, will be used to redeem the federal government’s outstanding debt.

The remaining amount of RM52.4bil will be utilised for the government’s development expenditure such as roads and infrastructure as budgeted and approved by Parliament in December 2018, stated Finance Minister Lim Guan Eng in a statement yesterday.

When contacted by StarBiz, a Finance Ministry spokesman said the redeemed direct debt would be “a mix of short-term and long-term securities”.

For context, long-term debt securities typically refer to instruments that have a maturity of more than a year.

While he did not name anyone, Lim described the allegations that the government had raised a net direct debt of RM58bil this year - exceeding Budget 2019’s target of RM52bil - as “baseless” and “false”.

However, it is worth noting that former Prime Minister Datuk Seri Najib Razak had tweeted earlier in May 2019 that the Pakatan Harapan government had borrowed a total of RM58bil in just the first five months of the year.

Lim said that the RM58bil figure failed to take into consideration two key factors.

“First and most importantly, the government issues and redeems its debt and securities regularly each year based on its yearly debt issuance and redemption schedule.

“Secondly, the issuance and redemption of debt necessarily fluctuates throughout the year in order to regularise the cashflow of the government. The issuance of debt will always be proportionally higher in the first half of the year because the revenue collection for the government is always lower in the same period.

“Correspondingly, the redemption of debt will always be higher in the second half of the year because the government will collect higher revenues during this period, ” he said.

In the January-August 2019 period, the Pakatan government redeemed RM38.8bil in direct debt. Meanwhile, another RM44.5bil will be redeemed in the September-December 2019 period.

Lim pointed out that by only looking at the current net direct debt figure without taking into consideration the planned redemption of debt and securities for the remainder of the year would give a grossly inaccurate picture of the country’s debt levels.

“It deliberately distorts the picture by looking at the monthly picture instead of the entire year, as the annual budget is done on a yearly and not monthly basis.

“Any attempts to jump to conclusions based on mid-year or incomplete data are clearly intended to mislead and does not reflect the true financial position of the government, ” he said. Lim reiterated that the government was on track to meet its 3.4% fiscal deficit target in 2019, which is lower than the 3.7% rate or RM53bil recorded in 2018.

“The planned RM52bil fiscal deficit will translate into 3.4% of the 2019 gross domestic product, ” he said.