Idris: National debt, budget deficit will continue to fall

SINGAPORE: MInister in the Prime Minister’s Department Datuk Seri Idris Jala has rebutted the alarmist rhetoric that Malaysia’s national debt is spiralling out of control, pointing out that the country can comfortably service its debt while having enough left over for the public good.

Idris said that both the national debt and the budget deficit would continue to fall, going forward.

“The Boston Consulting Group’s study is of the view that a country would be in trouble if it had debt at 100% of gross domestic product (GDP) and a budget deficit greater than 10% of GDP,” Idris told Singapore’s Business Times in an exclusive interview.

“Then you would be in what is called a sovereign crisis, like what Greece is in now.”


Way back in 2009, Greece had a national debt of 110% of GDP and a budget deficit of 13% of GDP. The figures have become worse since then.

In contrast, Malaysia in 2011 had a national debt of 53.8% of GDP and a budget deficit of 5.4% of GDP.

Idris, who has been tasked with implementing Prime Minister Datuk Seri Najib Tun Razak’s Economic Transformation Programme and who has been credited with leap-frogging private investment in the country, said it was important to have perspective.

“Our position is not dissimilar to India, according to figures from the Economic Intelligence Unit,’ said the minister. “And no one seems to think that India is in trouble.”

Idris’ remarks were a rebuttal of a series of commentaries on Malaysia’s debt position, most notably by economist Mohamad Arif who warned in a recent interview that Malaysia’s national debt could hit 100% of GDP by 2019.

He, however, said both the national debt and the budget deficit would continue to fall going forward.

“Just look at countries with high debt levels but with healthy revenues that can service them.

“In 2009, Singapore had a debt position of almost 100% of GDP but it’s not negative because it has very small budget deficits or outright surpluses. Japan, on the other hand, could have a problem because its debt is almost 190% of GDP and its deficit is around 7% of GDP.

“The United Kingdom has a higher debt (60% of GDP) than Malaysia and a deficit of almost 12% while the United States is here,” Idris said, pointing at a chart prepared by the Boston Consulting Group. It showed the United States with a national debt of around 50% of GDP and a deficit of 10%.

On the extreme right of the chart – which plotted a country’s debt against its budget deficit or surplus – was a small rectangle marked “safe zone”.

Only three entities were in that zone – Hong Kong, Indonesia, and the whole of Asean – taken as a single entity.

Malaysia, meanwhile, was slightly to the left and out of the rectangle in 2011 while the only country in a large rectangle to the left marked “sovereign crisis levels” was Greece.

“If you look at the chart, this was where we were in 2009,” said Idris, pointing at a spot even further left of the “safe” rectangle.

“And this is where we are in 2011. In short, we are moving in the right direction.

“It’s like any business: you can over-leverage but if you are making money, you can comfortably service the debt. Just like AirAsia Bhd, you have large debt but it’s comfortable. Those who miss this point should condemn Singapore but no economist does and that’s right. Singapore also gets a lot of revenue from its investments abroad.

“And our position will get better because we are cutting costs and increasing revenue,” Idris observed. “Last year alone, we increased tax revenues by RM20bil. That’s a lot of money and that’s why we could afford to give one-off payments to all those poor households.”

In Najib’s budget last year, RM500 was allocated to all poor households earning less than RM3,000 a month. – Business Times/Asia News Network