Economy on thin ice with household and national debt at high levels, says Rafizi

It won't take much for the country to land in economic chaos, says PKR lawmaker Rafizi Ramli. - The Malaysian Insider pic, November 30, 2013.The debts that the average Malaysian family has to shoulder is so high that take collectively, society could be plunged into chaos by even small economic shocks, said a Pakatan Rakyat lawmaker yesterday.

Pandan MP Rafizi Ramli said Malaysia’s total household debt is estimated at RM820 billion, higher than the government’s debt which stands at RM541 billion.

He claimed that Malaysia’s household debt was the second highest in Asia, the first being Sri Lanka.

"Since household debt is tied to the banks which are in turn tied to the government and vice versa, anything that hits one will impact the other. 

"Any shock, such as the ringgit losing value, inflation or Malaysia’s exports suddenly becoming unattractive, could have a spiralling effect", Rafizi explained.

He was speaking at a forum titled “What Lies in Our Future” organised by the Centre for Reform. Also present were Parti Buntar MP Dr Mujahid Yusof Rawa and Lembah Pantai MP Nurul Izzah Anwar.

Rafizi said that the country’s finances are so mismanaged by the Barisan Nasional administration, that should Pakatan Rakyat win the next election, it will still take years for the new coalition government to fix the economic mess.

Likening the country to a person who has to spend almost all his salary to pay off his debts, Rafizi said that as the country’s finances continue to worsen, there will be very few tools that can be used to fix it.

“The Deputy Prime Minister wants us to believe that having high levels of debt is okay. He says that the United States and Japan also have high levels of debts.

“But those are rich nations. The US can print more money (since all currencies are tied to the US dollar). But we cannot.

“It’s the difference between a rich man who is able get loans even though he has debt, and a poor man who has debt but can’t get loans. Malaysia is like the poor man.

"Instead of fixing the country’s finances by trimming operation costs and ending corruption, the BN administration is reducing the amount of aid it gives the people. You see this in how the government wants to reduce subsidies. First with fuel, then with electricity next year,” he said.

Rafizi predicts that 2014 will be known as the year everything goes up as Putrajaya has to raise prices in anticipation of the Goods and Services Tax (GST) in 2015.

“In the first two years of GST everything will go up as businesses pass on the cost of the tax down to the consumer.

“So Putrajaya has to raise prices before GST because it knows if it is done after GST, it will incur the public’s wrath and they will be overthrown.”

Rafizi claimed if the public does not protest against the rise in prices of goods and tariffs, it will send a signal to the BN administration that they can continue to raise prices year after year with impunity.

“The GST will start at 6% but it will gradually go up to 10%,” said Rafizi.