Malaysia still on track to meet 3.4% fiscal deficit target this year: Finance Minister

KUALA LUMPUR (Sept 26): Malaysia is on track to meet its fiscal deficit target of 3.4% of gross domestic product (GDP) and will raise RM52 billion worth of net direct debt this year, says Finance Minister Lim Guan Eng.

He dismissed allegations by certain quarters that the net direct debt raised had already hit RM58 billion as at Sept 26, saying they are "baseless and false".

In a statement today, Lim said the RM58 billion figure fails to take into consideration two key factors. One is that the government issues and redeems its debt and securities regularly each year based on its yearly debt issuance and redemption schedule.

"For the whole year, the government plans to raise RM135.7 billion worth of gross direct debt while redeeming RM83.3 billion in return. Specifically, RM38.8 billion has been redeemed in the January-August 2019 period and another RM44.5 billion will be redeemed in the September-December 2019 period.

"Hence, looking merely at the current net direct debt figure without taking into consideration the planned redemption of debt and securities for the remainder of the year would give a grossly inaccurate picture of the country's debt levels," he added.

He is of the view that the allegations were a deliberate move to distort the picture by looking at the monthly picture instead of the entire year. "The annual budget is done on a yearly and not monthly basis."

Lim said the RM58 billion figure also fails to take into consideration the fact that issuance and redemption of debt fluctuates throughout the year in order to regularise the cashflow of the government.

"The issuance of debt will always be proportionally higher in the first half of the year because the revenue collection for the government is always lower in the same period.

"Correspondingly, the redemption of debt will always be higher in the second half of the year because the government will collect higher revenues during this period," he said.

Lim said any attempts to jump to conclusions based on mid-year or incomplete data are clearly intended to mislead and does not reflect the true financial position of the government.

"Bear in mind that revenue collected will be also be used to pay off our existing debt and liabilities, such as the 1Malaysia Development Bhd debt. The Pakatan Harapan government is committed towards fiscal consolidation to reign in the excessive debts chalked up by the previous regime," he noted.

Meanwhile, the finance minister stressed that the RM52 billion funds raised this year — as planned in Budget 2019 tabled last year — will be used for development expenditure such as roads and infrastructure for the public.

The government's net direct debt touched RM53 billion last year, translating to a fiscal deficit of 3.7% of GDP.

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