Anwar: Fitch downgrade will cost M'sia BILLIONS in extra borrowing costs, aggravate Ringgit slide

KUALA LUMPUR - Opposition Leader Anwar Ibrahim warned the recent Fitch downgrade of Malaysia to negative could cost the country billions of ringgit in additional costs of funds as loans and debt become more expensive due to the higher risk weighting that would be attached to Malaysia's profile as a borrower.

"The implication is serious because it involves what is called costs of funds. Once a country is downgraded, it would incur additional costs in terms of borrowing, in terms of new sources of funding. As a whole for the country, it would amount to billions, additional, just because of the failure on the part of the Minister of Finance and the government to manage the economy in a responsible manner," Anwar had told a press conference on Monday.

He lambasted Prime Minister Najib Razak, who is also Finance Minister, for failing to stop the rot. According to Anwar, investors no longer found Malaysia's annual budgets credible anymore due to the government's inability to meet its targets and promises, especially with regard to the sky-high national debt and fiscal deficit.

"We have promised every year in the budget that we would deal with the deficit issue. No one in their right frame of mind or with economic management (knowledge) would want us to slash the deficit to the detriment of sectors such as poverty, education or agriculture or public health. But we have to deal with specific issues due to excessive spending, wastage poor economic management, endemic corrupt," said Anwar.

"If you don't reduce this, what the government says in the budget doesn't seem to carry any weight anymore. How is their response - 'yes we will deal with it in the next budget'. We have tried and dealt with it for the past 10 years and it has not worked primarily because of our failure to be really committed to address this issue. My concern is that it will have a really adverse effect on the economy."

Anwar also expects the Najib administration to hammer through the unpopular Goods and Services tax as a last resort to collect more revenue.

"Because of the deficit, they would embark on new adventures like the GST. They are talking about RM27bil of revenue to be collected - why (the need)? Because of the problem of public finance, of revenue. I think the public must be aware when the government talks about the deficit whilst unwilling to manage the economy in a more responsible manner, the burden will have to be borne by the general public," Anwar said.

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