Anwar: Zafrul failed to address Fitch's concerns behind Malaysia's downgrade

 

Finance Minister Tengku Zafrul Abdul Aziz has failed to address the root cause behind Fitch Ratings' decision to downgrade Malaysia's long-term foreign-currency issuer default rating from "A-" to "BBB+", said PKR president Anwar Ibrahim.

"The subsequent response by the finance minister to the downgrade - or rather the lack of it - is both alarming and disturbing.

"He failed to address the key areas of Fitch's concerns, namely political stability and governance," Anwar said in a statement.

Following the downgrade, Zafrul yesterday said the government was disappointed by the decision and listed a slew of economic stimulus measures.

However, Anwar said Zafrul ignored the concerns which Fitch Ratings had specifically raised, namely political stability and governance.

"The so-called 'Sheraton Move' in February not only triggered political chaos but also marked the beginning of a reversal of the institutional reforms that Pakatan Harapan had been championing.

"This minority government, unrepresentative of both the people's mandate and aspirations, has been blatant and unapologetic about misusing government-linked companies (GLCs) as tools to reward political apparatchiks," he said.

The Harapan government collapsed in late February due to defections and was replaced with the Perikatan Nasional government.

Anwar said when PN appointed Zafrul, who was seen as a technocrat, there was hope that he could minimise the impact of political machinations.

"However, it is increasingly clear that he has not grasped his key role of building the nation and providing hope for growth with an exit strategy.

"We do not know for sure where funding for the Covid-19 vaccine will come from, nor do we have adequate safety nets for the backbone of our economy, the small and medium-sized enterprises (SMEs)," he said.

Anwar said the downgrade shows that Malaysia needs a strong government that is committed to reform and is transparent, inclusive and firm.

"What we do not need is what is being presented now, the lack of substance and clarity. The time has run out for more excuses. Smoke and mirrors will no longer work," he said.

Meanwhile, DAP senator Liew Chin Tong said Malaysia is now in a worst-case scenario following the downgrade.

"The announced Budget 2021 is too timid to ensure a strong recovery, and due to the downgrade, our borrowing costs will go up regardless, constraining our ability to invest in the economy and create greater prosperity for all Malaysians," he said in a separate statement.

Liew said it was clear that the budget needed unconventional thinking due to the high economic cost of the Covid-19 pandemic.

"The budget should have focused solely on doing what was right for our economy, instead of trying to abide by the opaque and arbitrary rules of the rating agencies.

"That opportunity was missed, and ordinary Malaysians now risk being left to pay the price," he said.

Meanwhile, former Permodalan Nasional Berhad PNB) chief executive officer Abdul Jalil Rasheed said it was interesting that Fitch Ratings had cited governance as a key reason for the downgrade.

"When a government is not stable, there is a fear that policies will be populist rather than necessary, and this could drag down governance standards," he said in a series of Twitter posts.

Jalil said to improve governance, the government should start delinking business and politics so that they can be run professionally and ensure continuity even when there are changes in government.

He added that the government needed to be transparent and accountable on spending and also clearly articulate short, medium and long term economic plans.

"At some point, all these pandemic spending money needs to be paid back to bring down the debt level," he said. - Mkini