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PETALING JAYA: Malaysia’s debt levels are expected to rise this year to an estimated fiscal deficit of 5.8% to 6%, said Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz.
In an interview with CNBC yesterday, Zafrul noted that fiscal injections into the economy are around 20% of its gross domestic product (GDP) today.
“We anticipate and forecast that the deficit will increase this year for Malaysia. We are still focused on fiscal responsibility, of course. Now we have a debt / GDP ratio at around 53%, it will end at around 56%. We have the approval of Parliament to go up to 60%, ”he said.
The Malaysian government has launched stimulus packages totaling RM305bil, leading to increased spending and the need to borrow.
CNBC also noted that Moody’s Investors Service had warned in January about Malaysia’s debt before the pandemic.
Moody’s had said Malaysia’s debt burden was significantly higher than that of other countries with a sovereign credit rating of “A”.
Rating “A” indicates low credit risk.
Moody’s added that deep domestic capital markets and high levels of savings would provide a stable funding pool for government debt and partially offset these fiscal weaknesses.
Zafrul said that the positive aspect is that the government was optimistic that the economy would expand next year between 5.5% and 8%, from the expected negative GDP of -5.5% to -3.5% this year.
In a recent interview with StarBizWeek, Zafrul said there are plans to reduce the fiscal deficit from 3% to 4% in the medium term, while the debt-to-GDP ratio is expected to remain below 60% of GDP by the end of 2021. “We expect a V-shaped recovery based on current economic figures.
“However, as long as a vaccine has not been found, we are cautiously optimistic and must learn to adapt to the new standard operating procedures.
“The government’s priority is to save lives and livelihoods, and to support businesses affected by the Covid-19 pandemic, even if this means increasing our debt level temporarily. The government is confident that this is the correct course of action that balances the need to support the economy and manage our sovereign ratings, ”he said.
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