PETALING JAYA: The Malaysian economy’s ability to weather the Covid-19 pandemic is intact as the nation’s financial ecosystem remains resilient, said Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz.
In his winding-up speech on the royal address yesterday, Tengku Zafrul said economic activity is expected to increase gradually from the third quarter of 2020 on the back of the reopening of economic sectors as well as proactive measures taken by the government.
These measures entail the Prihatin, additional Prihatin SME and Penjana economic stimulus packages, amounting to RM295bil, which is almost 17% of the country’s gross domestic product (GDP) and is among the highest in South-East Asia.
The Prihatin and Penjana stimulus packages are expected to contribute more than 3% to GDP growth by 2020.
“However, given the Covid-19 crisis and the fully-funded fiscal injections through domestic loans for economic stimulus packages, Malaysia’s fiscal deficit is expected to increase by 5.8% to 6% of gross domestic product (GDP). “Note that this is still less than the 6.7% fiscal deficit rate recorded during the global financial crisis in 2009.
“Despite that, the government is committed to reducing the fiscal deficit below the 4% level in the medium term.
“In order to achieve this, the government will focus on preserving fiscal discipline, ” said Tengku Zafrul.
Tengku Zafrul also noted that all measures announced in the economic stimulus packages are one-off, time-bound, and targeted.
As such, there will not be a lasting impact on the finances of the federal government, which will in turn enable the government to implement fiscal consolidation measures in the medium term to create fiscal space to face future contingencies. Currently, banking institutions have capital buffers amounting to RM121bil - three times the capital buffers during the global financial crisis in 2009.
Going forward, the government will continue to streamline and implement various initiatives to improve the quality of life of the people, business sustainability as well as stimulate the economy through the 2021 Budget consultation which has since commenced and will be tabled this November.
In addition, the Twelfth Malaysia Plan 2021 - 2025 (12MP) scheduled to be presented early next year will continue to ensure that the economy can be supported and structured to ensure long-term sustainability.
On the issue of the national deficit rate and national debt position, Tengku Zafrul said the government’s current debt stands at RM1.2 trillion, of which the direct debt amounts to RM854bil.
He stressed that the government is not bankrupt as all debts have been paid on time.
“If you take into account the government’s liability, and the off-budget, which the Perikatan Nasional government does not do, the debt stands at RM1.2 trillion.
“But that does not mean the government is bankrupt - this is based on the ability of the government to repay its debts on time, ” he said.
Regarding the proposal for the government to submit a motion to increase the statutory limit of the national debt to 65%, the Finance Ministry aims to increase the statutory debt limit from 55% of GDP to 60% of GDP.
The increase in debt is to finance the deficit, which takes into account the implementation of stimulus packages and economic recovery with direct fiscal injection.As of end-June, the outstanding debt to GDP ratio is 53.2%, below the set 55% GDP limit.At end-2019, the outstanding debt to GDP ratio stood at 48.7%.
On the settlement relating to 1Malaysia Development Bhd (1MDB) scandal, Tengku Zafrul said there were records proving the previous government had on Dec 13,2019 offered for an out-of-court settlement of US$4bil with Goldman Sachs. However, the US-based investment bank rejected the offer and made a counter-offer of US$1.5bil.
There was a letter dated Feb 11,2020, between former attorney-general Tan Sri Tommy Thomas and former prime minister Tun Dr Mahathir Mohamad stating Goldman Sachs had raised its offer to US$1.75bil, which included US$164mil in taxes and US$567bil in fees that 1MDB had paid to the investment bank, he said.
Did you find this article insightful?
50% readers found this article insightful