Malaysia will not go bankrupt: Navaratnam

(Bernama) — Tan Sri Ramon Navaratnam, chairman of Asli Centre of Public Policy Studies, says it is misleading to conclude that Malaysia will go bankrupt based on the fact the government’s debt in relation to gross domestic product (GDP) ratio has been rising in the last few years.

“If nothing is done to control the rising debt, then the matter is serious ut any responsible government will take measures as the current government is doing so to reduce the debt, the debt-to-GDP ratio as well as the budget deficit,” he told Bernama today.

He was asked to comment on the claims by various quarters, including the Opposition, that Malaysia would be bankrupt by 2019 and that the people should not vote for the current ruling government in the next general election.

The claims were made on assumptions based on a recent revelation by the Malaysian Institute of Economic Research that the ratio of government debt to GDP had been increasing each year.

Navaratnam said it had been recognised that borrowings were necessary to extend the government’s investments in schools, hospitals, roads, railways, airports and other major infrastructures.

“Hopefully, that the debt (incurred) that had been invested to finance the infrastructure facilities will bring about viable investment returns that will boost economic growth.

“When the GDP grows and debt decreases, the debt-to-GDP ratio will improve,” he said.

Using catching influenza as an analogy, Navaratnam said, “If someone ignored the flu, not taking medicine, not resting, not taking measures to fight the flu and not building up his strength, the person may lapse into pneumonia.

“Any rational person will take necessary measures to get rid of the flu to prevent other illnesses.

“This is also how the economy behaves.”

Navaratnam noted that there were times when the Malaysian economy was under tremendous strain, particularly now from the current ‘side effects’ of the poor performances of the economies in the US, Europe and Japan.

“It is to be expected that Malaysia GDP growth to be slower, thus the government will have to take stronger measures to ensure a healthy and sustainable economy.

“We should not be unduly alarmed by allegations of impeding bankruptcy as this is untrue,” he said.

The Finance Ministry’s Undersecretary, Economic & International Division, Dr Sundaram Annamalai, had in October last year said the government was committed to make sure that the debt-to-GDP ratio would be below 55 per cent by 2020.

“We want to make sure that it does not exceed 55 per cent by 2020,” he said at the 2012 Post-Budget Dialogue organised by Malaysian Economic Association.

“Under the New Economic Model, we are supposed to bring it near balanced, right by 2020,” he said.

The federal government’s debt-to-GDP ratio for 2011 is expected to be at 53.8 per cent and 54.8 per cent this year.

Replying to the same question, Minister in the Prime Minister’s Department, Tan Sri Nor Mohamed Yakcop, had on Sunday dismissed similar claims that the country would be bankrupt by the end of this decade, saying that it was a political game of the Opposition and an attempt to scare the people.

He said domestic spending was growing by the year.

“If the people had apprehensions about the government, they will not spend.

“But, the reverse is happening. Domestic spending is going up annually.

“The people are not afraid to spend because they know that the country is progressive,” he said.

Nor Mohamed said since independence in 1957, the people had been enjoying improved living standards and one should not entertain thoughts about the country going bankrupt.

He said over the years the government had introduced various strategies to raise living standards of the people and the nation’s economy through various programmes, and recently among them, were the Economic Transformation Programme and Rural Transformation Programme.