KUALA LUMPUR, Aug 30 — Putrajaya must heed the warnings from credit rating agencies and cut Malaysia’s budget deficit or face an actual downgrade of the country’s sovereign ratings, the DAP’s Tony Pua (picture) warned today.
The opposition lawmaker said Prime Minister Datuk Seri Najib Razak should agree to recognise all off-balance sheet loans and contingent liabilities as federal government debt in the Budget 2014 proposals to be presented in Parliament soon.
“If Datuk Seri Najib does not reform the budgetary process as well as cut wasteful expenditure which are hidden with off-balance sheet loans, then we fear the ultimate consequence of not just a ‘negative outlook’ but an actual downgrade of our sovereign ratings by all three international rating agencies,” the Petaling Jaya Utara MP said in a statement.
The DAP’s national publicity secretary issued the caution even as he chided Treasury secretary-general Tan Sri Mohd Irwan Siregar Abdullah’s “arrogant and condescending” remarks on Fitch Rating’s recent country outlook.
Pua noted that Fitch’s outlook “exposes the lack of intent to tackle serious structural problems facing our country’s economy”.
Fitch had cut its outlook on Malaysia’s A-minus sovereign debt to negative from stable in July, citing a lack of reform to tackle rising debt.
Malaysia runs a relatively high government debt of 53 per cent of gross domestic product and has one of Asia’s highest household debt levels.
The Treasury official had yesterday played down Fitch’s outlook revision, saying the ratings agency was run by young analysts.
“The sheer contempt and arrogance in the comments made by the Finance Ministry secretary-general exposes the fact that the government doesn’t treat the negative outlook revision by Fitch Ratings last month as important.
“These comments are consistent with the position of Datuk Seri Najib Razak, who is both the finance and prime minister, who tried to make light of the negative revision by pointing out that Fitch still ‘affirmed our rating’,” Pua said.
He noted that it was not the first time Fitch had cut its outlook for Malaysia, and pointed out to a similar caution the rating agency issued last year in August.
“This means that the negative rating did not come without warning, but as a result of complete inaction by the government over the past year,” Pua said.
Of biggest concern, he said, was that Malaysia’s increasing reliance on off-balance sheet funding could potentially call into question the meaningfulness of its self-imposed debt ceiling at 55 per cent of the country’s gross domestic product (GDP).
“The ‘off-balance-sheet funding’ refers to Malaysia’s [penchant] to provide guarantees to government-linked borrowers which do not officially count as federal government debt.
“In reality, if both official government debt and government-guaranteed debt are put together, our debt to GDP ratio will be a much higher and worrying 68.9 per cent, as opposed to the official 53.7 per cent,” Pua claimed.
Analysts have said that Malaysia needs to carry out various economic reforms to rein in spending, including the scrapping of government subsidies.
The controversial goods and services tax (GST), which has yet to be introduced, has also been touted as a measure to boost government revenue and broaden the country’s tax base.
“The government’s [penchant] for listening only to the statements of praise, and contempt for those which criticise will only lead to our economic downfall,” he said.
