PETALING JAYA: The Pakatan Harapan administration’s appetite for loans to fund federal government expenditure places it at risk of breaking the law, says former prime minister Najib Razak.
He said the federal government is forbidden by law from borrowing money when the national debt exceeds the statutory limit of a debt-to-GDP ratio of 55%.
The laws are the Loans (Local) Act 1959 (Act 637) and Government Financing Act 1983 (Act 275).
“However, the PH government does not seem to care about the existence of these laws,” he said in a posting today.
He quoted a report by international rating company Moody’s that the debt-to-GDP ratio would reach 55% by the end of this year and exceed 55% next year.
“At this level, debt remains high compared to the median forecast of A rating of 37.6% for 2019, reflecting fiscal constraints as a major credit challenge for Malaysia,” he quoted Moody’s as saying.
Najib said: “This means the PH government is expected to break the government’s own laws next year when it exceeds this statutory 55% limit. This also means the PH government will have no room to stimulate and save the economy if the country is hit by an economic crisis.”
Najib said the national debt had risen to RM810 billion under Pakatan Harapan compared to RM686.8 billion at the end of 2017 under the Barisan Nasional.
The PH administration had also increased its debt ratio very quickly, he said.
At the time of the 2018 general election, the BN government had lowered the debt ratio to 48.7% but under PH, the figure had risen to 52.7% in the second quarter of 2019 and had continued to borrow heavily in the third quarter of 2019.
“But does he care?” he said, in what appeared to be a reference to the finance minister, Lim Guan Eng.
“When we are in a bad crisis and the government cannot save the country, they can still blame BN or me. But the rakyat will believe that I as well as international rating companies have repeatedly warned that the PH government is strongly borrowing at far faster rates than the BN government,” he said.