SAVED BY GST BUT NOT FOR LONG: 'Spending-spree' Najib dodges Fitch cut but at expense of the Rakyat - Wong Chen

KEADILAN is relieved that Fitch has maintained its rating of the Malaysian government at A-. A downgrade would have been severe and could have caused the Ringgit to fall further and push up the borrowing costs of the government.

Fitch, like every other rating agency assesses the ability of a borrower to pay and settle its borrowings. Its assessment is not an indicator of good governance of the economy and is therefore not an endorsement of good governance by the Najib administration. Fitch notes that Malaysia’s fiscal position continues to remain weak.

Its assessment yesterday, far from a “pat on the back” for UMNO-BN, merely maintains a status quo view of Malaysia with continued worries. The costs of borrowings remain the same at A-, with a minor improvement on outlook from negative to stable. In other words, the UMNO-BN government has effectively dodged a debt bullet, but it is still far from a recovery.

On closer study, two of the main reasons for the Fitch A- status quo assessment are (a) the roll out of GST and (b) the ending of the fuel subsidy.

Temporary reprieve as corruption & wastage getting worse

Both measures are credited for maintaining the A- rating.The end of the fuel subsidy however is not a government action per se, but a result of fall in the price of crude oil.

As for the GST, the government finally admitted in its 11th Malaysia Plan document, that it will collect some RM15 billion of additional tax annually from GST.

It is therefore the GST that has essentially saved the UMNO-BN government from the threat of downgrade but at the full expense of the rakyat. The rakyat is made to cough up RM15 billion extra to pay the mountain of debts that the UMNO-BN government created.

KEADILAN believes that unless and until the government seriously combats corruption and wastage, the ratings position of the country will not improve.

As such we will continue to monitor and combat corruption and wastage. Cases such as the recent MARA Australia property and the 1MDB international financial misadventures, remain the bane of the economy and overall governance of the nation.

Wong Chen, MP for Kelana Jaya

Chairman of the KEADILAN Investment & Trade Bureau