KUALA LUMPUR - Malaysia may issue up to RM18 billion (US$4.7 billion) in bonds this year and economic pundits today described the move as timely and crucial to bolster the economy amid fears sparked by the looming Iraq war.

Economists agreed that the government had an important role to spur the fragile economy amid a shortfall in foreign direct investment and the failure of the domestic private sector to fuel growth.

But they warned that funds from the bond issue must be utlilised prudently and in income generating activities to ensure socio-economic stability and sustainability.

Ramon Navaratnam, a former treasury deputy secretary-general, told AFP that the bond issue was crucial to counter an anticipated slowdown in the world economy since the funds could be used to help fund pump-priming measures due to be announced later this month.

"We have no other alternative. But we must be cautious in our spending because if we are not prudent our debts will increase," he said.