Pua: Najib lying on real debt situation

Prime Minister Najib in a state of denial on the Federal Gov’t debt exceeding 55 per cent of the GDP.

KUALA LUMPUR: The Opposition claims to have discovered that Prime Minister Najib Abdul Razak was using highly misleading statistics to put on an appearance and give false assurances on the Federal Government budget. “If the contingent liabilities figures were included in the official Federal Government debt, it would add up to nearly 70 per cent of the GDP.”

“It’s a mockery that Najib continues to insist that the Federal Government debt remains ‘capped’ within 55 per cent of the GDP.”

None of the statistics stated by the Prime Minister and Finance Minister was anywhere near accurate due to various creative manipulation of government expenditure, especially over the past five years, warned Petaling Jaya Utara MP Tony Pua who is also DAP National Publicity Secretary.

He stressed that the Opposition has already noted that much of the government’s expenditure was via newly created Ministry of Finance subsidiaries which undertook RM157.5 billion of loans guaranteed by the Federal Government as at 31 December 2014. In addition, he said, the contingent liabilities figures don’t even reflect all the Government’s “off balance sheet” expenditure.

He was commenting on Bernama reporting that Najib told the Budget 2016 Consultative Council meeting on Monday that the government remains committed to strengthening public finance without jeopardizing growth, while providing fiscal support for reform initiatives.

Najib told the Budget 2016 Consultative Council meeting on Monday that the fiscal targets for 2015 remain intact. “The deficit will be further reduced to 3.2 per cent of the GDP from 3.4 per cent in 2014 and the Federal debt would be capped within 55 per cent of the GDP.”

If Najib was really serious about commitment to ‘strengthening public finance’, the government must exercise transparency in these off-balance sheet projects and incorporate all these expenditures into its annual budget tabled for approval in the Parliament,” said Pua.

Only then can the people be assured that the budget and debt statistics reflect the actual spending by the government, he added, thereby allowing MPs and financial analysts to evaluate the prudence and appropriateness of government policies.

Getting into the nitty gritty details, Pua recalled that in a Parliamentary reply on 8 June 2015, Najib stated that “up till May 31 2015, there are nine government-owned companies via the Finance Ministry Incorporated (MKD) which have expenditures that have been classified as off balance sheet, currently borne by the government.”

One of these wholly-owned MKD subsidiaries, Pembinaan PFI Sdn Bhd (PPFI), borrowed and spent RM27.9 billion on various projects, said Pua in citing an example. “However, none of these projects or expenditures was ever reflected in any of the Budgets tabled over the past five years. The result was a significantly understated budget deficit.”

In fact, he continued, the PPFI loans from the Employees Provident Fund (EPF) and Kumpulan Wang Amanah Persaraan (KWAP) do not even get reflected as a contingent liability of the government via a clever financing agreement between PPFI and the government. What the Ministry of Finance has done, he explained, was to shift various sorts of expenditure “off balance sheet”.

As a result, he fumed these expenditures which are ultimately borne by the Federal Government are hidden from the annual budget figures and statistics. “These off-balance sheet expenditures are a clear loophole for the government to spend well above what has been officially approved by the Parliament in the Budget.”

The Finance Minister also admitted that as a result of this off-balance sheet expenditure, “the annual payment for this between 2015 and 2020 was between RM4.76 billion and RM11.62 billion”, pointed out Pua. “This represents the commitment on future government expenditure without the debt or liabilities reflected in the budget or balance sheet today.”

Again, the above means that the official debt of the government was severely understated to keep the figures below the 55 per cent debt limit, lamented Pua. “The budget deficit was correspondingly understated to give a false picture of a low, sustainable or reducing deficit.”

“These render the figures meaningless.”

It was hence disingenuous for the Prime Minister to continue using these figures to give the façade that “the government remains committed to strengthening public finance”, reiterated Pua.