Gov't guarantee for RM2.5bil MAS sukuk worrying

The government will be increasing the amount of federal liabilities by guaranteeing a whopping RM2.5 billion debt by Malaysia Airlines, warned DAP secretary-general Lim Guan Eng.

The sukuk programme announced by the national carrier will further expose ordinary Malaysians to higher debt risks if the carrier does not service its debt requirements, Lim, who is also Penang chief minister, said in a statement yesterday.

The amount of government-backed debt stood at an astounding RM96.9 billion in 2010, a 14.9 percent increase from RM84.3 billion the year before, Lim said. The figure for 2011 is still not available.

“If contingent liabilities are included, our government's debt exposure will increase by RM97 billion in 2010.

“Malaysians must remember that there is a day of reckoning for debts borrowed to be repaid. 

“Ultimately, the ordinary people are the ones to pay for all these debts, particularly when Malaysia goes bankrupt,” said Lim, who is a trained accountant.

Earlier, Malaysian Reserve reported that the MAS sukuk was likely to be government-backed as neither Ratings Agency Malaysia (RAM) or Malaysian Rating Corp Bhd (MARC) are involved in the rating exercise.

Government debt ballooning

Lim said that besides the MAS sukuk, the government was also guaranteeing a RM2.24 billion loan for the West Coast Highway and at least RM20 billion for the Klang Valley MRT project and several other projects.

“These loan guarantees are debt exposures to the federal government that must be included in our total debt figures,” he said.

Lim noted that these figures did not take into account the on-budget debt, which was also on the rise from RM266 billion in 2007 to RM456 billion in 2011- an increase of 71 percent - resulting in a growing budget deficit.

On Tuesday, Prime Minister Najib Abdul Razak vowed to cap the federal debt at 55 percent of GDP and reduce the budget deficit, which last year stood at 4.7 percent of the GDP.