economic report

Malaysia is classified as a medium indebted country with the national debt at 46.9 percent of the Gross Domestic Product, said the Finance Ministry in its 2001/2002 economic report released today.

The report said the nation's short, medium and long term external debt continues to remain low with the bulk of national debt (88.8 percent) being medium and long-term debt with a maturity profile ranging from one to 10 years.

"At this level and with well-scheduled debt profile, the national debt remains sustainable, manageable and within prudent limits," said the economic report.

Medium and long term debt of both the public and private sectors are expected to increase by two percent, reflecting largely the growth in public sector debt.

Public sector debt, the report said, is estimated to increase to RM87,735 million (11.8 percent) due to the increase in medium and long-term debt of the Federal Government and non-financial public enterprises.

On the other hand, the report added, the private sector debt is expected to decrease by RM56,224 million (10.4 percent) following the implementation of corporate debt restructuring programs.

The economic crisis in 1998 left Malaysia's banks burdened with heavy corporate debt and by the beginning of 1999 some $17.1 billion of non-performing loans were set up for restructuring by the Corporate Debt Restructuring Committee (CDRC). Of that, the authorities had dealt with $9.2 billion as of the end of last month.

The rest remain unresolved and has been a drag on the economy and the market.

Government debt to increase

Meanwhile, the report said, total federal government debt which comprises domestic and external debt of the government is estimated to increase to RM145,842 million (16.1 percent) this year or 42.2 percent of the GDP.

"Of this total domestic debt is expected to increase by 14.4 percent mainly due to larger issues of the Malaysian Government Securities which accounted for 84.6 percent of the total federal government domestic debt," the report said.

"The remaining 15.4 percent (RM8,775 million) consists of Treasury Bills, Government Investment Issues and Treasury Housing Loan Fund as well as syndicated loans by locally incorporated foreign banks," the report added.

The report said that the country's external debt, where market loans remain the largest component (69.7 percent), is estimated to increase by RM23,617 mil (25.5 percent) or 6.8 percent of the GDP as compared to RM18,820 million or 5.5 percent of GDP in 2000, while the remaining 30.3 percent are project loans.

"Taking advantage of the favourable market conditions as well as the nation's low external debt profile, the government tapped the international capital markets in July to raise the bond issue of USD1 billion," the report stated.

"Apart from meeting financing requirements, external borrowings have helped to maintain Malaysia's market presence, besides establishing a benchmark for corporate sector borrowing,"the report added.