KUALA LUMPUR: Malaysia’s rising level of national debt should not be taken lightly, as the country can no longer rely on oil revenue to keep the economy afloat, says former second finance minister Johari Ghani.
He said Malaysia was lucky in that the government was able to rely on the contributions from Petronas during the pandemic lockdown years.
“That is why we were okay. But these resources don’t last forever. So this is why we need to plan (the economy) urgently,” Johari who is also Titiwangsa MP said in an interview with FMT.
Oil and gas exports by Petronas contributed to Malaysia’s foreign earnings, and dividends, taxes and royalty paid by Petronas provided about 25% of federal government revenue.
Johari said the national debt should not be taken lightly even though Malaysia was blessed with natural resources. Rising levels of government debt were a symptom of an ailing economy, as experienced by Sri Lanka.
He said Sri Lanka had been unable to pay its debts or import essential items, resulting in food and fuel shortages, after Covid-19 had ravaged the island nation’s tourism-reliant economy.
Last year, Sri Lanka defaulted on its foreign debts of US51 billion (about RM226 billion) and was unable to make interest payments of US$75 million, with only US$25 million in usable foreign reserves at the time.
“When a country doesn’t manage its debts, I won’t be surprised, not just Malaysia, but many other countries will face the same problem (as Sri Lanka),” he said.
“We don’t even have (huge) reserves any more. Oil-producing countries have huge reserves, we don’t.”
He said if Malaysia’s RM1.5 trillion debt and continually widening federal budget deficit were not remedied, the economy would inevitably collapse and cause immense suffering to future generations.
GDP growth must be felt on the ground
On Tuesday, during a debate in the Dewan Rakyat, Johari said Malaysia’s GDP growth of 8.7% in 2022 was a result of the low-base effect of 2021. He said that economic growth had not recovered to pre-pandemic levels.
Malaysia’s GDP growth in 2021 was only 3.1% while Singapore and the Philippines enjoyed economic growth of 7.6% and 5.7% respectively.
“So while other countries recovered from the pandemic relatively quickly, Malaysia did not,” he said. Averaged out, Malaysia’s economy only grew 1.9% per year in the past three years.
Johari said this was why last year’s economic growth was not reflective of the realities on the ground.
He said one of his biggest concerns was underemployment, a result of not enough high-skilled jobs being available in the private sector compared to the number of fresh graduates being churned out every year.
“For the past five years, some 300,000 people on average have graduated from university, but there are only around 93,000 high-skilled private sector job openings each year.”
Many of these graduates ended up working jobs unrelated to their qualifications or in the informal sector, working in such jobs as delivery riders or in food stalls.
“The number of underemployed rose from 1.3 million in 2018 to 1.8 million in 2022. There are another two million in the informal sector,” he said, adding that it is a huge loss to the economy.