Idris Jala is on a weak foothold when he suggests countries get into sovereign crisis (based on Boston Consulting Group’s studies) when:

  • Government debt is more than 100% of GDP

  • Fiscal deficit is more than 10% of GDP

    • On the above basis, both Japan and Singapore would be in serious trouble.

    A more credible source is to cite is Carmen M Reinhart and Kenneth S Rogoff’s paper ‘Growth in a Time of Debt’ (2009) which concludes that for emerging economies ‘growth deteriorates markedly at external debt levels over 60 percent and further still when external debt level exceeds 90 percent, which record outright declines’.

    This is comforting for us.

    Malaysia’s foreign debt is 1.8% of GDP although total debt to GDP is at 54.7%.

    We will go into bankruptcy if our external debt exceeds 90% of GDP or where our domestic debt is not supported by pension funds.

    And that can only happen when Malaysia’s workforce cease to contribute to EPF and Socso.