Pua: Hidden debts behind negative Fitch Ratings outlook
Pua said the government was ignoring warnings on spiralling hidden debts as it continues spending money without fear of increasing its budget deficit. — File pic
(The Malay Mail) – “In reality, if both official government debt and government-guaranteed debt are put together, our debt to GDP ratio will be a much higher and worrying 68.9 per cent,” Pua explained.
DAP MP Tony Pua fingered the Najib administration today for Fitch Ratings’ negative reading of Malaysia’s finances, saying it was due to Putrajaya’s penchant for hiding debts that led to its credit rating revision from “stable” to “negative”.
This comes following the global ratings agency’s recent report that Malaysia’s public finances are its “key rating weakness”, and warned of future negative shocks should no reforms and measures be taken by the federal government to remedy the country’s financial standing.
“We call upon the government to follow the reform (of) its outdated accounting practice of ‘off-balance sheet financing’ and recognise fully these hidden debts as the federal government debt commitments,” the Petaling Jaya Utara MP said in a statement.
Fitch’s report noted that the federal government debt rose to 53.3 per cent of gross domestic product (GDP) at the end of 2012, up from 51.6 per cent at the same period the year before.
The general government budget deficit had also increased from 3.8 per cent of GDP in 2011 to 4.7 per cent in 2012, coming from a 19 per cent rise in public wages expenditure in a pre-election year.
Putrajaya has always maintained that federal government debt is well below its targeted ceiling of 55 per cent of GDP, but Pua stressed that the figure does not include government-guaranteed debt which is hidden.
In December 2012, Fitch had warned Putrajaya that its reliance on off-balance sheet funding could make the 55 per cent ceiling meaningless.
Fitch also highlighted recently that government-guaranteed debt has jumped from nine per cent of GDP at end-2008 to 15.2 per cent by end-2012.
“In reality, if both official government debt and government-guaranteed debt are put together, our debt to GDP ratio will be a much higher and worrying 68.9 per cent,” Pua explained.
He accused Prime Minister Datuk Seri Najib Razak of ignoring warnings on spiralling hidden debts as it allows Putrajaya to continue spending money without fear of increasing its budget deficit.
“By channelling development expenditure to off-budget measures, it enables the Najib administration to paint a false perception of financial prudence, that his government has the necessary political will and financial discipline to reduce the country’s fiscal deficit,” he added.
To remedy the problem, Pua also called on Najib to ensure that all privatisation projects are tendered competitively and government procurement be open and transparent.
Pua also urged Najib to cut down unnecessary spending in the Budget 2014, expected to be tabled in October this year, by reducing “Supplies and Services” expenditure which ballooned to RM33.7 billion in 2013 compared to RM23.8 billion in 2012.
According to Bank Negara Malaysia, the federal government debt currently stands at RM508.9 billion in the first quarter of 2013 compared to RM501.6 billion in the previous quarter. Government-guaranteed debt is at RM147.7 billion in the same quarter.
