KUALA LUMPUR, Nov 17 — The Malaysian government should consider increasing its statutory debt limit to 70 per cent of the country’s gross domestic product (GDP) in light of expected higher costs amid the Covid-19 pandemic, instead of taking an over-optimistic approach, a PKR MP said today.
Kangar MP Noor Amin Ahmad reiterated his call for the 70 per cent debt ceiling, which he said he had made previously while debating the bill for the government’s Temporary Measures for Government Financing (Coronavirus Disease 2019) Act and asking for the debt ceiling to be raised to between 65 per cent to 70 per cent.
Earlier this month when tabling Budget 2021, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz had said the Temporary Measures for Government Financing (Coronavirus Disease 2019) Act allows the government’s statutory debt level to be temporarily raised from the initial 55 per cent limit to 60 per cent.
But Noor Amin said the government should increase the debt ceiling to 70 per cent instead, as he predicted that the government spending using borrowed funds would have to exceed a limit such as 60 per cent of the GDP.
“Taking into account the temporary expansionary fiscal policy that we are taking now and the Temporary Measures for Government Financing (Coronavirus Disease 2019) Act which is planned to be in force until December 2022, which is more than two years, therefore for the coming two years, certainly our debt ceiling will be more than 65 per cent.
“So I wish to propose to the finance minister to review for possibly the statutory limit to be placed at 70 per cent,” he said, later voicing concern over the Finance Ministry’s “over-optimistic” attitude in setting the statutory debt limit at 60 per cent.
While saying he understood the need to support strict fiscal discipline and also supporting such an approach, he said he has a greater tendency towards being realistic in handling the current crisis.
Noor Amin also said he personally felt the Finance Ministry was similarly over-optimistic in its projection of such a high economic growth rate for the country in its Budget 2021 speech. The Finance Ministry had predicted a -4.5 per cent growth for the Malaysian economy for 2020, and a positive growth rate of between 6.5 per cent to 7.5 per cent in 2021.
Noting the International Monetary Fund’s projection of a -10.4 per cent growth in global trade in 2020, Noor Amin asked the government to state whether Malaysia’s own trade figures are currently in decline or increasing and how it would affect the government’s GDP and government revenue. The IMF had also predicted a -4.4 per cent in global economic growth in 2020.
He also urged for the government to provide a written reply on the source of government revenue and how it had been spent this year, since the estimates for the government revenue in 2020 had decreased by about RM37 billion.
“With losses between RM2 billion to RM2.4 billion per day due to the implementation of the movement control order (MCO), how much losses did the government face when it introduced the other MCO — CMCO (conditional movement control order), RMCO (recovery movement control order) and so on?” he said, asking how it had impacted the government’s revenue and deficit for 2020.
“The CMCO announcement that was recently made nationwide for me is too excessive as it will certainly give an impact on the country’s economy. And what was the basis to tighten these controls including in green zones?” he said when questioning the necessity for the reimposition of CMCO in virtually the entire country except for three states.
Malaysia first implemented the MCO on March 18, with non-essential businesses ordered to temporarily close, and entered into the conditional movement control order (CMCO) phase on May 4, where most businesses were allowed to reopen.
Malaysia later shifted to the recovery movement control order (RMCO) on June 10 with this phase expected to end December 31, but many states have now seen CMCO re-imposed amid a recent surge in Covid-19 cases.