Stimulus plan to push debt-to-GDP ratio to 58.4 pct
PARLIAMENT | Malaysia's debt-to-GDP ratio is expected to hit 58.4 percent once Putrajaya's RM45 billion stimulus plans fully kick in.
Finance Minister Zafrul Abdul Aziz said although Putrajaya was seeking to increase the debt ceiling to 60 percent of gross domestic product (GDP), it will still have more fiscal space to implement countercyclical measures if necessary.
PARLIAMENT | Malaysia's debt-to-GDP ratio is expected to hit 58.4 percent once Putrajaya's RM45 billion stimulus plans fully kick in.
Finance Minister Tengku Zafrul Abdul Aziz said although Putrajaya was seeking to increase the debt ceiling to 60 percent of gross domestic product (GDP), it will still have more fiscal space to implement countercyclical measures if necessary.
"We are planning ahead, but we must manage the situation with discipline and care.
"By preparing to enhance the stimulus if necessary, and I think we need it, any increase in debt undertaken cannot be done suddenly," he said.
Zafrul was responding to Lim Guan Eng (PH-Bagan) who is among the chief proponents of a stimulus plan of RM90 billion, double the amount in the Temporary Measures for Government Financing (Coronavirus Disease 2019 [Covid-19]) Bill 2020 bill that is currently being debated at the committee stage.
Zafrul warned that should Lim's suggestion be taken up, the debt ceiling of 60 percent would be breached, and the debt service ratio would reach 18.7 percent, up from almost 15 percent currently.
"That's why we have to do this in stages. We will see how things are going in terms of the Covid-19 situation," he said.
Following this, Lim interjected and pointed out that the stimulus plan would contribute to GDP and hence lower the debt-to-GDP ratio.
To this, Zafrul acknowledged that Lim was referring to the multiplier effect of the stimulus plan and pointed out that doubling the amount proposed in the bill would not necessarily bring the required results.
"For every ringgit spent, we want the highest multiplier for us to improve growth," he said.
To another of Lim's questions, Zafrul said RM30.6 billion had been allocated for the stimulus plan, and RM20.6 billion was disbursed.
Malaysia's debt-to-GDP ratio hit a high of 103.37 percent in 1986 before gradually reducing 31.91 percent in 1997.
Between 2009 and 2019, the figure had floated close to the 50 percent mark.
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