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Malaysia’s RM1.5t ballooning debt forces Malaysians to seek ‘greener’ pastures in Singapore
KUALA LUMPUR, Aug 12, 2024: Malaysia’s RM1.5 trillion national debt appears to be ballooning unabated.
And lets not forget that it was also revealed in Parliament that the domestic debt is also RM1.5 trillion!
Is it then a wonder that job opportunities and potential financial rewards are dwindling - forcing Malaysians to work in foreign countries, especially Singapore?
Carry on with the Taliban-like “policies” and Malaysians will suffer undue financial misery to put food on the table for their loved ones.
To the PAS-led states, you reap what you sow. Tesla has pulled out of Malaysia and it believed to be due to the threat of religious bigots to businesses.
No News Is Bad News reproduces below an article that shows Malaysia’s continuous growing national debt every year:
Malaysia’s RM1.5 trillion debt time bomb
-12 Aug 2024, 07:00 AM
Malaysia’s growing national debt, if left unchecked, could lead to a debt spiral, decimating the average Malaysian livelihood.
Malaysia is swimming in debt.
Our national debt has been on a consistent upward trajectory over the past few decades. The chart below illustrates the national debt from 1973 to 2023, highlighting a stunning increase in recent years.
Malaysia. (2024, August 8). Economic Indicators, Historic Data & Forecasts | CEIC. https://www.ceicdata.com/en/country/malaysia
The chart shows that Malaysia’s national debt has surged from approximately RM31 billion in 1978 to around RM1.5 trillion today, an incredible 48-fold increase in a mere 46 years.
This staggering increase is due to various factors, including extensive government borrowing to fund infrastructure projects, social programmes and economic stimulus packages. The Covid-19 pandemic further exacerbated debt levels, with the government spending considerable amounts of money to prop up the faltering economy.
Growing debt-to-GDP ratio
A critical measure of a country’s debt sustainability is the debt-to-GDP ratio, which compares the national debt to the gross domestic product (GDP). Malaysia’s debt-to-GDP ratio has been rising steadily, raising alarm among economists and policymakers.
As of this year, Malaysia’s debt-to-GDP ratio stood at 65.6%, up from 50% in 2011, as shown in the graph below:
Malaysia. (2024, August 8). Economic Indicators, Historic Data & Forecasts | CEIC. https://www.ceicdata.com/en/country/malaysia
This increase indicates that the country’s debt is growing faster than its economy. In comparison, Indonesia and Thailand have much lower debt-to-GDP ratios of 39% and 56%, respectively, highlighting Malaysia’s more precarious fiscal position.
Growing annual debt servicing load
The cost of servicing national debt – the payments required to cover the interest and principal on borrowed funds – is a significant burden on Malaysia’s finances. As the national debt increases, so does the cost of servicing that debt, which diverts resources from other essential areas.
This year, Malaysia’s annual debt servicing load is expected to be around RM46.1 billion, representing around 16% of total government revenue. This figure is expected to rise further as debt levels continue to grow.
In real terms, every extra ringgit we spend servicing our debt is one less ringgit that we could have used for educating our children or shoring up our public services.
Comparison with other government expenses
To contextualise the impact of debt servicing, it is crucial to compare it with other major government expenditure. In 2023, Malaysia’s budget allocated approximately RM52 billion to education, RM17 billion to defence and RM36 billion to healthcare. The annual debt repayment cost, therefore, surpasses the defence and healthcare budgets and constitutes a significant portion of the education budget.
This comparison underscores the substantial financial strain that debt servicing imposes on Malaysia’s fiscal policy, limiting the government’s ability to invest in critical sectors and public services.
Potential consequences of a debt spiral
The potential consequences of Malaysia’s mounting debt are multifaceted and severe. A debt spiral, where increasing debt leads to higher borrowing costs and further debt accumulation, could have several adverse outcomes:
1. Reduced sovereign credit rating: Credit rating agencies may downgrade Malaysia’s sovereign credit rating, making it more expensive for the government to borrow in the future. This could deter foreign investment and undermine investor confidence;
2. Higher interest rates: Rising debt levels can lead to higher interest rates on government bonds, increasing the cost of borrowing and further straining the national budget;
3. Fiscal austerity measures: To manage the debt crisis, the government may be forced to implement austerity measures, including spending cuts and tax increases. These measures can slow economic growth, reduce public services and increase social unrest;
4. Currency depreciation: A debt crisis can lead to a loss of confidence in the national currency, causing it to depreciate. A weaker currency can increase the cost of imports, contribute to inflation and erode the purchasing power of citizens; and
5. Economic recession: In severe cases, a debt crisis can trigger an economic recession, characterised by declining GDP, rising unemployment and reduced consumer spending. A prolonged recession can have lasting negative effects on the country’s economic development and standard of living.
Comparison with debt crises in other countries
Malaysia’s situation is showing some resemblance to the debt crises experienced by countries like Egypt and Sri Lanka. Both nations faced severe economic turmoil due to high levels of national debt, leading to significant economic and social challenges.
Egypt: In the early 2010s, Egypt grappled with a debt crisis characterised by high debt-to-GDP ratios, soaring inflation and declining foreign reserves. The government implemented austerity measures and sought international assistance to stabilise the economy, but the social impact was profound, with increased poverty and unemployment.
Sri Lanka: In recent years, Sri Lanka has faced a severe debt crisis, with debt levels exceeding 90% of GDP. The country struggled with large debt repayments, leading to a currency crisis, inflation and social unrest. Sri Lanka sought assistance from the International Monetary Fund (IMF) to manage its debt and stabilise the economy.
Malaysia’s current debt-to-GDP ratio of 65% is lower than that of Egypt and Sri Lanka during their crises, but the trend is concerning. Without decisive action, Malaysia risks falling into a similar debt spiral.
Conclusion
Malaysia’s growing national debt is a clear and present danger to our country’s stability. The consequences of a debt spiral – as distant and as unlikely as it may seem now – are catastrophic, as Egypt, Greece and Sri Lanka have amply demonstrated. So how do we fix this?
We’ll explore this in my next article. Stay tuned.
The writer can be contacted at kathirgugan@protonmail.com.
The views expressed are those of the writer and do not necessarily reflect those of FMT.
News
After Tesla confirms it's not coming, Malaysians reflect on Anwar's enthusiasm for Elon Musk
Many question the prime minister for 'bending backwards' with a series of exemptions for Elon Musk's businesses.
August 8, 2024 11:11 AM
Anwar Ibrahim attends a video conference with Elon Musk, a meeting which ended with internet users questioning the billionaire entrepreuner's indifference throughout the session.
Anwar Ibrahim has faced a barrage of cynical comments from Malaysians on social media after it was revealed that Tesla, the electric vehicles giant owned by Elon Musk who the prime minister repeatedly mentioned in speeches and election campaign programmes last year, is not investing in the country.
But while Malaysia is not the only country Tesla is not interested in - the others being Thailand and Indonesia - it was Anwar's behaviour of "bending over backwards" and building momentum over Musk's interest in Malaysia that infuriated social media users.
Among other things, the government has exempted Tesla from the approved permit (AP) requirement for selling foreign cars in Malaysia.
"This should be much bigger news: the Malaysian government got absolutely conned by Elon Musk, bending over backwards for him in embarrassingly sycophantic ways (to an audience that doesn’t even admire Musk), giving Tesla undeserved privileges, only to get jack shit in return," read a reader's comment on popular automotive website Paultan.org, responding to news that Tesla is abandoning plans to set up EV factories in the region.
Another reader accused Anwar of misleading Malaysians when he "shouted about Tesla investments here".
"For this obvious lie he needs to step down. Many other honourable leaders and presidents have done the same, so must PMX," said Lol Whut, referring to Anwar.
Just a few months after taking office, Anwar made Musk and his business empire a central theme in his speeches to convince Malaysians that the government would attract quality investments.
Anwar was also seen building momentum for a "meeting" with Musk, saying that the billionaire entrepreneur had asked to speak to him.
The meeting turned out to be a video call, with Anwar himself leading the 25-minute "discussion" in which internet users scrutinised Musk's online activity during the session.
It turned out that during the 25-minute session, Musk was busy replying to tweets on unrelated topics, none of which had anything to do with his meeting with the Malaysian prime minister.
He was clearly bored with the conversation as he tweeted; timestamps do not lie," software engineer Colin Charles told MalaysiaNow at the time, comparing Musk's behaviour during the meeting with Anwar to the way Musk lauded President Joko Widodo during their meeting months earlier.
Musk's seeming indifference, however, did not deter Anwar from giving business to Starlink, another company under him providing satellite-based internet connection.
At the end of the meeting, Anwar decided to purchase 40 Starlink internet devices to be installed in universities across the country, a move criticised not only because of the way the order was placed, but also over the competitiveness in both quality and price of the US satellite internet service provider compared to local internet services.
This was followed by Putrajaya granting Starlink a 10-year licence to operate in Malaysia, exempting the company from a requirement for a 49% threshold for foreign equity.
The latest development that Tesla was abandoning Malaysia and other neighbouring countries was first reported by Thailand's English-language daily The Nation.
"Tesla is currently only discussing charging stations, with the factory plans suspended not just in Thailand but worldwide. They are not proceeding in Malaysia, Indonesia, or anywhere else except for China, America, and Germany," the paper said quoting a source.
Malaysians reacting to the news could not help but recall the momentum Anwar had built up when he frequently mentioned Musk's name during his campaign speeches for elections in six states last year.
Others, however, reacted with sarcasm.
"I believe this is a fake news. The PMO should summon The Nation and ask for explanations about their sources," wrote one reader in the comments section of pro-Pakatan Harapan news site Malaysiakini.
Another comment said, "I think the real issue is the blowing your trumpet and hot air boasting that our attention-seeking PM excels in. It is unwise to announce something that was a long shot anyway. Surely PM and his team of experts and advisers must have told him?"
On X, user Batu Bata said: "If only the announcement of Tesla coming in to Malaysia previously was not done with great gusto and glee as if it was such a magnificent achievement by the PM."
But Dewa Said replied: "Since when did Tesla announce that they are planning to open a factory in Malaysia?"
A popular X account critical of the government summarises:
"After getting exemptions from local ownership laws, Tesla finally confirms it will not open a factory in Malaysia," a post on Naratif Rakyat reads.
"In the end, Tesla got to open a showroom to import cars built entirely in China to be sold to Malaysians."
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