PETALING JAYA: Deputy finance minister Ahmad Maslan today affirmed the government will not raise the statutory debt ceiling, currently at 65% of gross domestic product (GDP), but did not shed light on how the administration plans to deal with its massive RM1.5 trillion debt.
“Without contingent liabilities, the debt is RM1.2 trillion, which is about 61% of GDP. I don’t see a need to raise the debt ceiling, because it has already been raised twice from 55% to 60% and then again from 60% to 65%,” he told reporters today.
Ahmad was responding to questions raised following Prime Minister Anwar Ibrahim’s announcement last week that the country’s debt and contingent liabilities amount to a whopping RM1.5 trillion or around 80% of GDP.
Speaking to reporters after the signing of a memorandum of understanding (MoU) between the Malaysian Small Entrepreneurs Chamber of Commerce and Uniti Asia Group of Business, he said the government statutory debt, sans contingent liabilities, remained below the 65% debt ceiling.
Statutory debt is composed of Malaysian Government Securities, Malaysian Government Investment Issues and Malaysia Islamic Treasury Bills.
It excludes contingent liabilities, which includes debt such as incurred by 1MDB and borrowing taken for development or infrastructure projects. Hence, whilst its statutory debt remains below the ceiling, it is still a cause of great concern.
Statutory debt is expected to creep towards 64% of GDP this year based on the projections of various banks and research houses.
Purpose of a debt ceiling
The statutory debt limit is the total amount of money that a government is authorised to borrow to meet its existing legal obligations.
The ceiling acts to prevent excessive public debt – which requires large service payments – from reducing the available funding from being invested in productive activities and to stimulate economic growth.
Malaysia’s statutory debt ceiling was raised from 55% to 60% in late August 2020, and then again from 60% to 65% in 2021, because of the need to undertake more borrowing during the pandemic. The increase of the ceiling to 60% was the first since July 2009.
This was channelled into relief packages, funding for the healthcare sector and subsidising wages for employees.
Plugging the holes
The decision not to raise the debt ceiling may indicate the unity government is hoping to service its mountain of debt through increased revenue collection. This is likely to come in the form of reducing tax leakages, plugging the holes, and fixing the pipes of the government’s revenue collection system.
“We are experiencing high leakages. In less than two months at the ministry of finance, I have identified RM3 billion to RM4 billion that can be saved,” Anwar said at the 2023 Budget Dialogue last week.
He also added up to RM10 billion could be saved from leakages in the government procurement system, although no further details were revealed.
Ahmad commented last month on the tax leakages from the “black economy”, asking the Inland Revenue Board (IRB) to find “creative” ways to tax their existing activities.
MSMEs not forgotten
Ahmad noted today that Budget 2023 would emphasise on supporting the country’s 1.2 million micro and small-to-medium enterprises (MSMEs).
“We will pay a lot of attention to (MSMEs) in the budget, as they act as a driving force in the economy,” he said, adding support may come in the form of tax incentives.
A series of 18 dialogues up to Feb 10 to collate suggestions for Budget 2023 will be held. Ahmad said the budget would “definitely provide good news” for Malaysian citizens, and MSMEs in particular.
“We aim to make all these businesses great on both a local and global scale, becoming ‘glocal’,” he added.