KUALA LUMPUR, June 16 — Lim Guan Eng ticked off Barisan Nasional (BN) today for plunging Malaysia deeper into debt, saying that Putrajaya’s added spending of a whopping RM13.8 billion would blow the lid off the country’s budget deficit for 2012.
Describing this as irresponsible fiscal spending by the ruling pact, the Penang chief minister said the extra expenses would place Malaysia’s budget deficit at a high of RM59.7 billion, the country’s highest to date.
“This would easily put Malaysia’s deficit as a percentage of the Gross Domestic Product (GDP) at more than 6 per cent in 2012, which is significantly higher than the initially projected 4.7 per cent, especially if the widely anticipated worldwide economic slowdown hits Malaysia,” Lim (picture) said in a statement.
The DAP secretary-general also warned that the added expenses would see government debt soar drastically beyond RM500 billion by year-end. As of the first quarter of this year, government debt stood at RM470 billion.
This, he said, was before factoring in “contingent liabilities”, which he described as loans to be settled by taxpayers if companies like Malaysia Airlines (MAS) have to be bailed out.
“Estimates of these contingent liabilities at the end of 2011 stand at RM110 billion.
“If contingent liabilities are added to official government debt, our debt-to-GDP ratio would stand at over 65 per cent at the end of 2012, which is well above the statutory limit of 55 per cent debt-to-GDP ratio,” he said.
On Thursday, Putrajaya tabled a supplementary supply Bill asking for RM13.8 billion more to spend this year, further fuelling fears that the Najib administration would not be able to rein in the deficit and breach the statutory debt ceiling.
The Bill, tabled in the Dewan Rakyat by the Finance Ministry, which Prime Minister Datuk Seri Najib Razak heads, allocates RM360 million to the Election Commission, RM113 million to the Prime Minister’s Department, RM446 million to the Works Ministry and a whopping RM11.2 billion for “treasury general services” ahead of federal polls that must be called within the year.
The Malaysian Insider reported earlier this week that BN MPs will each receive RM1.5 million to plough into their constituencies and that the ruling coalition is looking towards having a general election after Najib tables Budget 2013 this September 28.
The prime minister had also admitted recently that the government was considering a repeat of the RM500 dished out early this year to low-income families under the Bantuan Rakyat 1 Malaysia (BR1M) that cost RM2.6 billion.
Lim said the request for extra funds was proof that the ruling pact planned to dish out more allocations to its MPs, while non-BN MPs, including those from Pakatan Rakyat (PR), would not receive a single sen.
He noted that RM30 million from the RM112 million allocated to the Prime Minister’s Department was for a “National Branding Unit”, which he said was not necessary.
“One wonders why Malaysia needs a branding unit when there are already existing ministries such as the Tourism Ministry and agencies such as MATRADE.
“Good companies which make good products coupled with good governments which implement good policies are sufficient to increase the brand profile of a country. Just think of what Samsung has done for Korea and what Apple has done for the United States, without the need of a National Branding Unit,” he said.
Lim also questioned the need to pour an added RM360 million for the EC’s operations, pointing out that the highly-criticised agency had failed in its basic duty of ensuring the current electoral roll is free from discrepancies.
Despite this, however, the Bagan MP said BN’s strategy of going to taxpayers to fund its “irresponsible spending habits” was nothing new.
He gave a reminder that the government had asked for an additional RM13.2 billion in June last year and RM10.3 billion in March this year, both for Budget 2011.
Lim said that said since 1997, Malaysia has been recording 15 consecutive years of budget deficits with government debt soaring from RM89 billion to RM470 billion as at March this year.
Compared against the country’s gross domestic product (GDP), he said that debt levels had increased five-fold since 1997 while GDP had only grown three-fold.
Najib said late last month the government will ensure that Malaysia’s debt would not exceed the statutory ceiling under the Loan (Local) Act and Government Funding Act due to its prudent management of the nation’s finances.
He said the national debt stood at 53.5 per cent of GDP, which stood at RM881 billion for 2011 after a recent revision, leaving Malaysia just RM13 billion shy of the 55 per cent debt limit.
The Najib administration has pledged to cut the fiscal deficit, which dropped to 4.8 per cent last year from a 22-year high of over seven per cent in 2009.
But Malaysia’s slowing economy, which recorded a third consecutive quarterly dip in growth to 4.7 per cent in the first three months of the year, has raised questions of whether the federal government can keep spending in check.
Analysts have warned Malaysia to brace for a significant slowdown here due to rising linkages with top trade partners including China, the world’s second-largest market which economists say is headed for a sixth consecutive quarterly drop in growth with worse to come.
A Greek exit from the euro zone, which is growing threat, would cause a second recession in as little as four years in Malaysia as the knock-on damage to Europe poses a threat to the global economy, Bloomberg reported analysts and economists as saying recently.
The World Bank also urged Malaysia last week to expedite reforms such as subsidy cuts and broadening the tax base, key initiatives that have stalled ahead of an impending federal election, if it wants to achieve Putrajaya’s target of being a high-income economy by 2020.