2009 national debt breaches 50% of GDP, 1st time in 5 years

KUALA LUMPUR — Malaysia’s national debt for 2009 rose to RM362.39 billion or 53.7 per cent of GDP, its highest level in five years, according to the Auditor-General’s report released today.

The Auditor-General said in the report that this was the first time the debt to GDP ratio had breached the 50 per cent mark.

This contrasts with Prime Minister Datuk Seri Najib Razak’s reply in Parliament in June that Malaysia’s total debt had been reduced in 2009 to RM233.92 billion from RM236.18 billion in 2008.

Najib had also said that the debt to GDP ratio for 2009 was only 34.3 per cent, up from 31.9 per cent in 2008.

But today’s Auditor-General’s report said that the national debt had actually risen beyond what was announced by Najib, largely due to domestic debt.

“The debt ratio to GDP at the end of 2009 is 53.7 per cent, the highest level in five years and over 50 per cent for the very first time,” said the report.

The report stated that from 2005 till 2008, there was a general decline in the ratio between the government’s debt to the GDP.

It was 48.2 per cent in 2005, 42.3 per cent in 2006, 42.8 per cent in 2007 and 41.4 per cent in 2008.

The main reason behind the high national debt last year, according to the audit report, was due to an increase in the government’s domestic debt.

“Towards the end of 2009, the unsettled domestic debt and foreign debt amounted to RM362.39 billion, an increase of RM55.96 billion (from 2008’s RM306.44 billion) due to an increase in domestic debt.

“The government’s domestic debt totalling RM348.60 billion is 96.2 per cent of the total debt of the federal government last year,” said the report.

The report also showed a decline in the government’s foreign debt — from RM26.91 billion in 2005 to RM13.77 billion last year — while domestic debt steadily increased from RM201.76 billion in 2005 to RM348.6 billion in 2009.

In his June parliamentary reply, Najib had moved to quell fears raised by a minister that Malaysia would one day go the way of Greece and Iceland and become a bankrupt nation.

In a written response to a question by Lim Kit Siang (DAP-Ipoh Timor) in Parliament, the PM gave an assurance that the government was taking steps to ensure that Malaysia’s debts would be reduced and maintained at a manageable level.