BNSC: Malaysia's debt-to-service ratio highest during Dr M's premiership

PETALING JAYA: The Government is in a good position to service its national debt as its debt-to-service ratio has been greatly reduced since the 1980s, said the Barisan Nasional Strategic Communications (BNSC) team.

It said the debt-to-service ratio measures the Government's capability to repay its debt, adding that it is calculated by dividing the national debt – including the interest and the principle sum – by the total Government revenue for the year.

On Monday (March 12), BNSC deputy director Datuk Eric See-To released a table of the Government's debt-to-service ratio history obtained from the Economic Planning Unit, which showed a 12% ratio for 2016.

Comparatively, Malaysia's debt-to-service ratio was at its highest during former prime minister Tun Dr Mahathir Mohamad's tenure from 1981 to 2003.

In his first term as prime minister, the debt-to-service ratio increased from 12.9% in 1981 to 23.9% in 1985.

It continued to increase to a height of 31.8% in 1987 before gradually decreasing.

See-To said the table showed that almost a third of Malaysia's yearly revenue in the 1980s was used to repay debt compared to 12% currently.

"Historically, we are not at high levels compared to the Mahathir years – especially the first six years after he came into power where he more than doubled our debt-to-gross domestic product (GDP) ratio in just a few years," See-To said.

"If we did not go bankrupt then when our debt-to-service ratio was 32% and debt-to-GDP ratio was above 100%, how are we supposed to be going bankrupt now when our debt-to-service ratio is 12% and our debt-to-GDP ratio is 50.9%?" he said.

See-To gave an example, saying that while a university student without an income would be unable to repay a RM10,000 debt, a working professional with a RM5,000 monthly salary would be able to service a RM100,000 loan.

He added that the debt-to-service ratio and debt-to-GDP ratio is a more meaningful context of the country's financial position as it shows the Government's capability to repay its debt rather than the total absolute amount of debt.

See-To said this in response to a question posed by Selangor Mentri Besar Azmin Ali to Finance Minister Datuk Seri Najib Tun Razak in Parliament on Monday (March 12) where Azmin questioned the issues affecting the rise in the national debt.

Najib explained that it was not a question of the quantum of national debt, but the ability to repay it.

"Singapore's national debts are bigger than ours and their repayment abilities are also existent. Our ability to repay is unquestioned and international rating agencies have put us in the top categories. Our national debt is managed well," he said.