Moody’s just rubbished Mahathir’s RM1 trillion claim

TTF: On the 23rd of May 2018, Dr Mahathir Mohamad told a press conference that our national debt was some 65% of our GDP. The figure was a sharp contrast from the 50.8% estimate that one can easily derive from legitimate banking sources. Mahathir attributed his estimate to the national debt level which he insists is at an ‘unmanageable’ RM1 trillion. Despite every attempt by financial experts to correct him, he refuses to budge and insists that our debt may well have exceeded the 1 trillion mark.

Well, Moody’s doesn’t seem to think so (see news item below).

A recent report by the credit rating corporation put our Debt-to-GDP ratio at a healthy 50.8%, meaning, Najib left Mahathir with a vibrant economy. As a matter of fact, the ratio had never once exceeded the 55% mark under Najib but way surpassed the 80% mark under Mahathir. But the Prime Minister will never admit this.

So deep is his hatred for Najib, he deliberately sent the economy on a downward spiral by frightening off investors with incorrect estimates. By doing so, he afforded his men the luxury of snapping up shares at rock bottom prices while telling you that it was Najib who destroyed the economy. And who do you think will ultimately pay the price once our Debt-to-GDP ratio actually touches the 65% mark?

You will.

KUALA LUMPUR: Moody’s Investors Service is maintaining its estimate of Malaysia’s direct government debt at 50.8% of GDP in 2017.

It said on Wednesday its assessment of contingent liability risks posed by non-financial sector public institutions has also not changed following some statements by the new Federal Government led by Pakatan Harapan which won the 14th General Election (GE14) on May 9.

“However, the new administration’s treatment of large infrastructure projects that may be placed under review but have benefited from  government-guaranteed loans in the past, and outstanding debt from state  fund, 1Malaysia Development Bhd (1MDB, unrated), will play an important role in determining risks that contingent liabilities pose to the credit profile,” it said.

Moody’s said fiscal measures are a particular area of focus, given that the country’s high debt burden acts as a credit constraint.

“Consequently, to what extent the new government achieves fiscal deficit consolidation will be vital in gauging the eventual effects on Malaysia’s fiscal metrics and credit profile,” it said in a report entitled: “Government of Malaysia: FAQ on credit implications of the new government’s policies”.

Commenting on the impact of the new government’s removal of the country’s goods and services tax (GST), Moody’s said in the absence of effective compensatory fiscal measures, “this development is credit negative because it increases the government’s reliance on oil-related revenue and narrows the tax base”.

Moody’s estimated revenue lost from the scrapped GST would be around 1.1% of GDP this year — even with some offsets — and 1.7% beyond 2018; further straining Malaysia’s fiscal strength.

On the planned reintroduction of fuel subsidies, it viewed this as credit negative because subsidies distort market-based pricing mechanisms.

The move could alsostrain both the fiscal position and the balance of payments while raising the exposure of government revenue to oil price movements.

On the growth outlook, Moody’s pointed out the change in government will not materially alter growth trends in the near term. The removal of the GST could boost private consumption in the short term.

“However, a review of large infrastructure projects could also result in any pick-up in investment being more spread out than Moody’s had previously anticipated,” it said.

Sumber: The Star Online

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