COMMENT | Following the sea change in government with the new Pakatan Harapan coalition in place, many observers are paying intense and critical attention to fathoming the true nature and size of Malaysia’s public debt obligations. Greater transparency is demanded.

The previous BN administration, under former prime minister Najib Abdul Razak, had been less than transparent about the true size of the government’s liabilities.

How was this accomplished? There was a three-fold approach. First, the annual federal government budgets (as presented to Parliament) recorded for most years a modest deficit; such deficits were financed by borrowings in ringgit-denominated loans.

While direct borrowings from foreign sources were minimal, foreign hedge funds and other investors held sizable holdings of ringgit-based paper. These holders were attracted in part by the relatively higher returns Malaysia offered at a time when global interest rates were at record low levels. Using this approach, total federal government debt was kept to a level averaging just above 50 percent of GDP.

Second, much of the financing of development projects came from loans that never appeared in the federal government budget; these were off-budget loans and were raised by publicly owned/controlled corporations and entities.

These loans appear, for the most part, to have been guaranteed by the federal government. While these were government liabilities, they were not fully reported. As a result, Parliament and the public were left in the dark; off-budget borrowing hid the size of the debt from regulators; and the virtual outsourcing of development projects provided an opportunity to ignore procurement rules, such as the need for competitive bidding.

Third, Bank Negara reporting of debt data was partial and lacked clarity or any semblance of full disclosure. And large loans linked with the Kuala Lumpur-Singapore High-Speed Rail Link and the East Coast Railway Line projects were not highlighted in the government’s Economic Report or the Budget presentation.

In the Economic Report, the reported consolidated public sector debt at the end of 2016 amounted to RM 901 billion. However, this figure was not highlighted; ministerial statements emphasised the lower figure of federal government debt of RM648 billion.

One may well ask: why did these BN administration practices never come to light...