A HORRENDOUS claim has been making the rounds on social media. It says that Malaysia is buried in debt and is the next country, after Sri Lanka, to go bankrupt.
Curiously, many have chosen to believe this is the gospel truth. There have been plenty of rational explanations by economists debunking this myth, but they are buried mainly in the business sections of newspapers. So the general population may have missed the more reliable information.
Meanwhile, social media narratives, unfortunately, move faster and spread wider in the age of “forwarded” messages.
So it’s good that Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz has taken to social media to explain these economic issues, including how rising interest rates in the United States affect the ringgit as well as other currencies.
I was informed about a pastor in a particular church who told his congregation that Malaysia is sinking financially, and he, presumably, based his sermon on this false social media news.
He purportedly even said we are the next Sri Lanka. The worshippers were then told to pray for Malaysia. It’s blasphemous because the words of preachers, regardless of their faiths, are often believed wholeheartedly.
We can argue that Malaysia is falling behind, but we haven’t arrived at the point of being a failed or bankrupt nation.
Countries with external debts running into trillions of US dollars include China, Japan, Germany and the United States, and certainly, none of them are failed states even though their debts eat into a large part of their GDP.
Sri Lanka’s economy has collapsed with debt in foreign currencies totalling US$51bil (RM227bil), and they have run out of reserves. According to one report, the country only has US$1.92bil (RM8.5bil) in reserves, which is a pittance to secure imports such as fuel.
Malaysia has a respectable amount of foreign exchange reserves while our debt in foreign currencies is a small percentage of total debt. We had a stockpile of US$116bil (RM516.4bil) at the end of last year while our debt in foreign currencies is US$6bil (RM26.7bil).
“Their [Sri Lanka’s] trade balance was negative US$8bil (RM35.6bil) for 2020, ours was a positive US$63bil (RM280bil) for 2021 – we earn a considerable amount of foreign exchange to purchase our imports, they didn’t, which is why they can’t buy foreign goods,” wrote senior business writer P. Gunasegaram at Malaysiakini.com recently.
“Their debts are 101% of gross domestic product or GDP, the sum of goods and services produced in a year, ours is 68%. Importantly, they don’t have enough foreign exchange to service their foreign debts, we have more than enough,” Gunasegaram wrote.
He rightly pointed out that “right now, it’s really not a fair or reasonable comparison at all” to equate Malaysia with Sri Lanka.
Gunasegaram further wrote that “Malaysia’s is A3 – it signifies that the issuer has financial backing and some cash reserves with a low risk of default. A-/A3 is the seventh-highest rating a debt issuer can receive and is four rankings above the cut-off for junk bonds – not great but not bad either.”
There are also a lot of misconceptions about debt. So we have economists, politicians – and journalists, sometimes – talking about various sums of money, small and large. If the point is about the country’s total debt, then it would run into trillions. It’s nothing unusual since most countries are in similar situations. However, the political agenda on social media wants us to believe that our entire generation will have to settle these debts.
It’s mind-boggling for the common man to digest that Malaysia has a total public sector debt of RM1.36tril.
But this amount includes borrowings by the federal government, statutory bodies and non-financial public corporations. The government also issues debt papers in what is one of the largest and most developed debt markets in the region. These bonds will eventually need to be repaid, too.
The federal government’s external debt is about RM28bil (US$6bil). Again, it seems big, yet it’s very manageable.
The question here is how we’re managing it, as debt is weighed based on a percentage of GDP. Currently, it’s about 63.8% of GDP and it used to be 53% before the Covid-19 pandemic. This merely means we need to be prudent and bring the numbers down over the next few years.
Another big difference between Sri Lanka and Malaysia is that we are net exporters of natural gas, and we can afford to subsidise fuel and keep inflation under control. On the other hand, Sri Lanka’s major exports are tea, garments and textiles.
But that doesn’t mean all is hunky dory down the road for Malaysia if we don’t get our act together. Disturbing signs have already prevailed.
Mismanagement and the results of corruption, leakages and incompetency usually only surface a decade later in most cases.
We are not Sri Lanka, but neither should we be content with what’s happening in Malaysia. We deserve better.
Despite what our politicians may want to say, we must gradually lower our subsidy bills. We are spoilt. We live in one of the most subsidised nations on Earth, yet many are clueless about this.
Given this situation, any reduction can only be done gradually without hurting the people’s pockets too much.
As it is now, Malaysians are already struggling. Had the government stuck to its earlier decision to remove ceiling prices on chicken, eggs and cooking oil, the effects would have been disastrous and could possibly have even resulted in massive street protests.
The central bank’s foreign reserves of US$109.2bil (RM480.9bil) as of June 15, 2022, is reportedly the lowest since early 2021, and the drop of US$3.6bil from May 31, 2022, is also the largest in seven years. While economists don’t think the decline is alarming, we certainly need to recover our revenue.
Our leaders need to talk more about growth. Please stop wasting time on unproductive and contentious issues which divide the nation and bring no value to the country.
What we need to do is to improve our competitiveness, employment, public finance, productivity and efficiency.
To be fair, Malaysia attracted RM42.8bil in approved investments until March this year.
Yes, Covid-19 has caused Malaysia to slip seven notches to 32nd in the 2022 International Institute for Management Development World Competitiveness Ranking, so we need to get back on our feet now.
If we can’t even resolve our labour shortage issue, it means we’re still on the starting blocks while everyone else is eyeing the finish line.
Oil palm fruits are left rotting, restaurants can’t open, and businesses are struggling because of this simple issue – which should have been sorted out in the last two years when we were stagnant.
Billions of ringgit are going down the drain as Malaysia squabbles over hiring methods and protocols.
It’s often said that Malaysia is a lucky country as we have crude oil and palm oil, but it’s a waste when we don’t have people to harvest these fruits, and the peak season is right now, unfortunately.
So we really need to sell the Malaysian story better to ourselves and to the world because we’re ailing from an image problem.
