Malaysia’s debt levels set to rise this year


In a recent interview with StarBizWeek, Zafrul (pic) said there are plans to bring the fiscal deficit down to 3% to 4% in the medium term, while debt-to-GDP is expected to remain under 60% of GDP by end-2021. “We expect a V-shaped recovery based on current economic numbers.

PETALING JAYA: Malaysia’s debt levels are expected to rise this year at a fiscal deficit of an estimated 5.8% to 6%, said Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz.

In an interview with CNBC yesterday, Zafrul noted that fiscal injections into the economy stand at around 20% of its gross domestic product (GDP) at present.

“We are anticipating and forecasting that deficit will go up this year for Malaysia. We are still focused on fiscal responsibility, of course. We have debt-to-GDP now at around 53%, it will end at around 56%. We have approval from Parliament to go up to 60%, ” he said.

The Malaysian government has rolled out stimulus packages with a total value of RM305bil, leading to higher spending and the need to borrow.

CNBC also highlighted that Moody’s Investors Service had in January warned about Malaysia’s debt prior to the pandemic.

Moody’s had said Malaysia’s debt burden was significantly higher than other countries with an “A” sovereign credit rating.

The “A” rating indicates low credit risk.

Moody’s added that deep domestic capital markets and high savings would provide a stable funding pool for the government’s debt, and partly offset these fiscal weaknesses.

Zafrul said the bright spot was that the government was optimistic the economy would expand next year by around 5.5% to 8%, from the expected negative GDP of -5.5% to -3.5% this year.

In a recent interview with StarBizWeek, Zafrul said there are plans to bring the fiscal deficit down to 3% to 4% in the medium term, while debt-to-GDP is expected to remain under 60% of GDP by end-2021. “We expect a V-shaped recovery based on current economic numbers.

“However, for as long as a vaccine has not been found, we are cautiously optimistic and must learn to adapt to new norms of standard operating procedures.

“The government’s priority is to save lives and livelihoods, and support businesses affected by the Covid-19 pandemic, even if this means increasing our debt level temporarily. The government is confident that this is the right course of action which balances the need to support the economy and manage our sovereign ratings, ” he said.

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