DAP’s Pua disagrees with Auditor-General’s worry over govt’s new loans, says refinancing common practice

DAP’s Tony Pua says it is normal practice to refinance loans. — Picture by Miera Zulyana
DAP’s Tony Pua says it is normal practice to refinance loans. — Picture by Miera Zulyana

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KUALA LUMPUR, Nov 2 — DAP’s Tony Pua today said he disagreed with Auditor-General (AG) Datuk Nik Azman Nik Abdul Majid’s worry of the Malaysian government financing older matured loans by taking on new debts, saying it is normal practice to refinance loans.

“I actually disagree with the AG in this case, because every country refinances their existing debt with new debt. I don’t think there is any country out there that doesn’t do that, you cannot pay off all your debts at one go,” said Pua during the OB Kay Lian Post-Budget 2022 Roundtable discussion webinar held this morning.

He said this when asked to comment on the 65 per cent debt ceiling previously approved by the government, when discussing measures within Budget 2022.

“Your debt is measured as a percentage of your gross domestic product (GDP), so theoretically, as long as your country continues to grow, your debt will actually in absolute terms, also grow.

“What you want to hope for is that the debts will grow at a slower pace than your GDP, and that’s the measure that we should be looking at, and not as to whether the absolute debt is going up or down, that is the wrong relative measure to take into consideration,” he added.

This was in response to Nik Azman airing his worry about the government taking on new loans to finance the repayment of loan principals which have matured.

The Auditor-General’s Report on the Federal Government Financial Statement as well as 2020 Federal Ministries and Departments Compliance Audit that was tabled in Dewan Rakyat last week found RM98.058 billion or 50.4 per cent of RM194.555 billion of new loans of the government was for the repayment of the principal of loans in 2020.

Pua today then outlined his worry about the growing percentage of the government’s operating expenditure that is allocated towards servicing their debts.

“The percentage of the operation expenditure used to service debt at the moment will increase to more than 18 per cent in 2022, that is worrying and unfortunately that is the consequence of many off-budget measures that were taken in the [Datuk Seri] Najib’s [Razak] administration,” he said.

Among the projects Pua called out included bona fide ones like the Mass and Light Rail Transit projects, but also cover the more suspicious ones, he said, such as the ECRL, and 1Malaysia Development Berhad projects.

“A lot of mega projects were undertaken off-budget with huge amounts of debt, and some of which these projects themselves are unable to pay, and when the debt matures, it then falls on the government to actually pay this debt,” he explained.

“We are actually paying the price for the excesses from the 2010s that is actually happening today; the sudden leap in debt repayment that we are facing today up to above 18 per cent and is expected to increase further in subsequent years,” he added.

Additionally, Pua said the debt ceiling of 65 per cent of the GDP is a reasonable limit if the country can hit the ground running and live up to its potential and projections.

“But if you have no growth, low productivity, or potential growth is limited or ability to achieve your potential goals are hampered by corruption, by wastage, then 65 per cent of the GDP is a little bit worrying,” he said.

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