Former prime minister Mahathir Mohamad claimed last week that Malaysia's current debt level is "healthy" compared with Greece's.
But the debt-to-GDP percentage Mahathir relied on tells next to nothing about the full extent of Malaysia's debts; the nature of these debts; or what can happen next.
The real devil lies in the details, namely:
(i) The trend in the debt level
How has it changed in the recent past? Is there momentum in a certain direction? The federal government's debt had doubled in just four years from 2007 and 2012. Will it stop growing, or will the trend and absolute totals continue their upward rise?
In the last decade, our finance ministers have repeatedly pledged to reduce the budget deficits. This has not happened. Instead, deficits have ballooned and the federal government's debt has mounted.
(ii) The causes of debt
For what are the borrowings and for whom? Are these borrowings for worthwhile investments that benefit the public? Are these liabilities being used to cover government operating costs or to prop up failing crony companies or the stock market? Is the use of costly loans for projects with low or no rates of return justified?
Almost a trillion ringgit was recently whisked out of the country in the form of illegal outflows. This is capital flight. It is conclusive evidence that our economy is 'leaking out' wealth.
Capital flight explains what the crony private sector and other rent-seekers are doing with their ill-gotten gains: they are squirreling these away in offshore accounts in Swiss banks and tax havens such as the Cayman Islands.
It is no wonder that private-sector investment in Malaysia is dismal. To make up for foregone domestic investment and job creation, environmental standards and taxes are lowered to lure foreign investors such as Lynas.
(iii) The types of debt, both known and 'hidden'
How much of the debt is borrowed from the savings of citizens (internal debt)? How much is borrowed from foreign lenders (external debt)? How much of these debts is government debt, and how much is private?
A big chunk of Malaysia's debt, RM467.4 billion as of September 2012, is internal debt (Bank Negara Malaysia, Quarterly Bulletin, Third Quarter 2012).
This is the portion of debt that is popularly spoken about - the debt-to-GDP percentage of 53 percent involves almost entirely this debt.
This is money borrowed domestically from the savings of citizens. It is money belonging to individuals taken from the Employee Provident Fund (EPF), Tabung Haji, pension funds and other social security organisations and institutions (see 'Debt growing but manageable, says MOF', The Malaysian Insider, Sept 28, 2012).
At what rates of return are Malaysians being compensated for this borrowing? Will they recover their savings at all? Will they be fraudulently 'compensated' with funds coming from the liquidation of oil and forest assets; in other words, from the public's own pockets? Or will a Ponzi scheme be devised to borrow more to honour commitments that come due?
Wholly separate from internal public debt is private external debt - money borrowed from foreign lenders. This is a portion of debt that is hardly spoken about.
The government's external debt is RM17.3 billion as of last September, according to Bank Negara. But this is the tip of the iceberg.
We should also be very interested in the private sector's external debt.
Because when private companies borrow from foreign lenders, the government is obliged to pay off these debts if the companies fail to do so. Simply put, citizens might have to pick up the tab. That is what happened in the debt crises in the west.
That is why this category of external debt is called 'publicly guaranteed debts'.
Beyond these, there is the 'non-guaranteed' debt obligation of the private sector. These affect the overall creditworthiness of the nation and also cannot be ignored.
Bank Negara says Malaysia's total external debt was RM257.8 billion at the end of September 2012.
How much of this is publicly guaranteed debt held by private corporations?
It is alleged that one Malaysian tycoon and his group of companies owe RM34 billion ('Syed Mokhtar's debts raising fear of future bailout, says Tony Pua, The Malaysian Insider, Sept 27, 2012). How much is publicly-guaranteed? What about other Malaysian corporations?
More disturbing are the claims that the Malaysian government has large hidden debts.
These are 'contingent liabilities' and 'off-balance sheet' borrowings, which are said to have amounted to RM117 billion in 2011 (see 'Hidden debt' edges M'sia beyond 55pct limit', Malaysiakini, Sept 27, 2012).
There is also little knowledge about annual interest payments and the due dates of debts.
Any meaningful public discussion of Malaysia's debt situation must consider all of the above.
Neither the Finance Ministry nor Bank Negara give a full picture of all of the above.
Fromer premier Dr Mahathir Mohamad said nothing about any of the above.
He told Malaysians not to worry about debt because our foreign reserves are strong.
But foreign reserves or public wealth are not for settling the illegitimate debts accumulated by corrupt regimes. They are not to be used as collateral to pile on new debts or service existing ones.
The size of the foreign reserves gives false comfort. During the 1997 East Asian crisis the government devalued the total stock of ringgit using a currency peg. Foreign reserves took the hit and shrunk.
Mahathir comments lull Malaysians into a false sense of security. These comments should however serve as a wake-up call.
Malaysians should demand for clarification about Malaysia's total debt and its consequences. The Finance Ministry and Bank Negara should respond.