Putrajaya explains why direct debit up despite reduction of total debt and liabilities

KUALA LUMPUR, Sept 29 — Putrajaya’s total debt and liabilities had been reduced to 75.4 per cent of the GDP in 2018, down from 79.3 per cent in 2017 while its direct debt increased to 51.2 per cent of the GDP from 50.1 per cent in the same time period.

Finance Minister Lim Guan Eng said that the direct debt rose, despite the total debt and liabilities being reduced because the federal government is trying to directly fund its fiscal deficit without resorting to off-balance sheet financing as a form of cover up.

“Despite the Government’s total debt and liabilities being reduced from 79.3 per cent of GDP in 2017 to 75.4 per cent in 2018, direct debt increased from 50.1 per cent of GDP in 2017 to 51.2 per cent in 2018 because the Pakatan Harapan government refused to resort to off-balance sheet financing to cover-up dubious debts,” he said.

“Direct debt rose from 50.1 per cent of GDP in 2017 to 51.2 per cent in 2018 to directly fund the fiscal deficit, without the Government resorting to off-balance sheet financing to cover-up dubious debts as practiced by the previous administration.”

Furthermore, a substantial portion of the RM1.087 trillion debt and liabilities comprised hidden debt and liabilities that the Pakatan Harapan (PH) administration inherited from the previous Barisan Nasional (BN) regime.

This includes RM38.3 billion worth of 1MDB debt that the then BN government was secretly servicing and other liabilities amounting to RM260.1 billion involved off-balance sheet government expenditure masked as “Public Private Partnership (PPP)” or “Private Finance Initiatives (PFI)”.

Lim explained that the financial cost, risks and obligations of these projects lie entirely with the Federal Government.

He claimed the PPPs and PFIs were abused by the then BN government to give the perception of low budget deficits, and a corresponding lower level of perceived debt.

The improvement in transparency has been lauded by international ratings agencies and the PH administration have also successfully reduced its “Other Liabilities” from 19 per cent to 12.8 per cent of the GDP and reduced 1MDB debt from 2.8 per cent to 2.2 per cent of the GDP.  

The minister also reiterated Putrajaya’s success in renegotiating multiple mega projects such as MRT2, Pan-Borneo Highway and LRT3 which has saved the federal government its figure committed guarantees by at least RM46 billion while cancelling the Trans-Sabah Gas Pipeline and the Multi Product Pipeline.

At the same time, Lim said that the government is seeking to recover the assets and funds misappropriated by 1MDB.

“We have recovered approximately RM925.1 million to date, not including the sale of the mega-yacht Equanimity for RM523 million. These and future recovery proceeds will go entirely towards the repayment of 1MDB debts,” he said.