Monday, October 01, 2012

RM502.4 Billion debt - a clear indication of the failure of BN government

Looking at the rise of Malaysia's debt, I must say that the Barisan Nasional government has failed all Malaysians when the federal government debt continued to rise 10.1 percent to a new height of RM502.4billion or 53.7 percent of the GDP this year. Until the early 80's it was less than RM50b,until around 1998 it was about was about RM250b in 2006, and in the last 6 years it has doubled... We have had no other government but the UMNO led BN government - so blame can lie on no other. 

This anxiety is readily transferred to national debt -- the debt owed by a government to its creditors. How, people ask, will governments repay all of the hundreds of billions of dollars that they owe? As British Prime Minister David Cameron put it: "Government debt is the same as credit-card debt; it's got to be paid back."

The next step readily follows: in order to repay, or at least reduce, the national debt, the government must eliminate its budget deficit, because the excess of spending over revenue continually adds to the national debt. Indeed, if the government fails to act, the national debt will become, in today's jargon, "unsustainable".

Again, an analogy with household debt readily suggests itself. My death does not extinguish my debt, reasons the sensible citizen. My creditors will have the first claim on my estate -- everything that I wanted to leave to my children. Similarly, a debt left unpaid too long by a government is a burden on future generations: I may enjoy the benefits of government extravagance, but my children will have to foot the bill. - Does Debt Matter by By Robert Skidelsky, as appeared in a column in New Straits Times on 23/1/2012

It may be an Election Budget - when this BN government tries to dish out 'goodies' to recover support from Malaysians - but it is still irresponsible and do not look into protection of individual Malaysians today and in the future. Malaysia is country blessed with a lot of natural resources, and with a small population of less than 30 million, and as such we should never have ended up in this state of affairs.

Source: Figure 1: Outstanding debt of the Malaysian federal government - Source: Bank Negara Malaysia - ALIRAN Monthly

Any good corporations will not give their employees bonuses when it doing badly - incurring greater debt, but here we have our BN government promising one and a half months bonus to public servants - which this government would like to call 'government servants'. 

CIVIL servants will get one-and-a-half month bonus under Budget 2013, in recognition of their work implementing government policies.

Prime Minister Datuk Seri Najib Tun Razak said the civil service was an invaluable part of the Government’s administrative machinery at all levels....- Star, 29/9/2012, Bonus for civil servants

'Work implementing government policies' - what about all those other workers in Malaysia who certainly also worked hard for the good of Malaysia and its people. What about those EX-CIVIL SERVANTS who lost their status and other benefits when the government privatized telecommunications, electricity and water supply, waste management, rail transportation....TELEKOM, TNB, KTM, INDAH WATER,...and all the other workers who without their hard work, Malaysia would not have developed and Malaysians would not be served...Giving incentives to workers is a good thing (i.e. if we can afford to do so) - but when it is given it must be given to ALL workers, especially those who are earning low incomes....likewise all ex-workers also need to enjoy these benefits. (Will those in the civil service then who were convinced by the government to opt for EPF and who today would not be pensioners or 'PESARA' - have not this government forgotten them? Remember, it has been shown that many workers under the EPF scheme are in dire straits now with insufficient monies to sustain their livelihood today...and certainly up to the time they pass on. This government sadly is concerned only for 'Pensioners' - not the rest of the former workers - now called 'Warga Mas')
The pension scheme is intended to provide financial security for retired Government employees.
Retirees who opt for the pension scheme will be paid a fixed monthly income, a service gratuity payment and enjoy benefits such as free medical treatment at Government hospitals.- myGovernment website

  “Effective 2013, the government will implement an annual pension increment of two per cent without having to wait for any review of the remuneration system or salary adjustments,” he[Prime Minister Datuk Seri Najib Tun Razak] said.- IMalaysia Website

The federal government debt continued to rise 10.1 percent to a new height of RM502.4billion or 53.7 percent of the GDP this year, pushing the country one step nearer to the legislated debt ceiling of 55 percent.

The figure, which has doubled since 2006, is equivalent to nearly RM17,000 for every Malaysian.

This is the first time in the nation’s history that the debt has passed the RM500 billion line while the 53.7 percent figure is the highest since the early 1990s.

According to the Economic Report 2011/2012, Malaysia has accumulated RM456.1 billion of debt in 2011.

It stated that the hike in debt is due to “higher domestic borrowings to meet funding requirements”.

However, it stressed that “the level remains within the prudent limit of 55 percent of GDP, a fiscal rule observed by the government”.

At least two international rating agencies have warned that Malaysia’s sovereign credit rating may be cut if the government does not deliver promised reforms to cut spending to reduce its fiscal deficits.

The report pointed out that debt service charges in 2012 are projected to increase by 15.4 percent to RM20.5 billion but it will remain manageable at 10.1 percent of operating expenditure.

In 2011, it was increased by 13.4 percent to RM17.7 billion, or 9.7 percent of the operating expenditure.

“Although the debt level has increased in recent years, debt servicing capacity remains affordable.

“To ensure fiscal sustainability and macroeconomic stability, the government will ensure total federal government debt does not exceed 55 percent of GDP while debt service charges will be capped below 15 percent of revenue,” read the report.

Subsidy bill to rise

Expenditure on subsidies is expected to increase sharply by 17 percent to RM42.4 billion or 4.5 percent of GDP in 2012, but it is still lower than the sharp hike of 56.9 percent in 2011.

The category, which comprises various subsidies (RM31.5 billion), social assistance programmes (RM10 billion) and incentives (RM854 million), accounts for 20.9% of operating expenditure.

“These include subsidies for fuel, sugar, cooking oil and various incentives to increase food production as well as educational assistance and social welfare programmes to improve social-economic mobility of the rakyat,” said the report.

Allocation for fuel subsidy, the largest component in the category of subsidies, is expected to increase by 23.5 percent to RM25.2 billion in 2012 on account of high refined petroleum prices as well as the one-off cash transfers and vouchers given to various target groups to ease the rising cost of living.

The increase was most significant in 2011 when it recorded a 112.1 percent jump to reach RM20.4 billion.

The special financial assistance programmes announced under Budget 2012, namely the one-off cash transfers, incentive payments and book vouchers, cost the government RM3.2 billion and were accommodated within the allocation for fuel subsidies.


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