Economist: Donation drive to settle govt debts embarrassing, bad precedent

It may not only encourage the government to be lax in debt management but may cause the government to expect the people to bail it out of debts in future too, warns Ramon Navaratnam.

Tan Sri Ramon Navaratnam. (Youtube Screengrab)

GEORGE TOWN: An economist said the government’s donation drive to reduce the country’s debts is unprecedented and likely the first of its kind in the world.

However, former finance ministry deputy secretary-general Ramon Navaratnam said while most might support the cause out of patriotism, the move might set a bad precedent in managing the country’s finances.

Earlier today, the government announced the setting up of Tabung Harapan Malaysia, a voluntary donation drive to “help ease” the country’s debts.

“While it is a laudable initiative, it does not seem fair for the people to bail out the government.

“It’s embarrassing for the rakyat to be expected to bail out the government debt. After all, (the country’s finances) it is not that desperately serious yet, nor are we so very strained in the budget so far.

“This is naturally a bad precedent because it might encourage the government to be lax in debt management and expect the people to bail them out,” the former Transparency International president said when contacted.

“I would rather the government do more to reduce corruption and wastage and raise competition and productivity in the economy.”

Ramon said if the proposed fund was pursued, the donations should be used to help the poor, especially for the low-income group.

He said the donations should be ideally given to a government-controlled charity with a good record or an NGO with a clean record of helping the needy.

“I doubt they will raise much money. But if they do, there is plenty of scope to help the Bottom 40 group,” he said.

Ramon said the government should state how much it hoped to raise and also set an end date for the donation drive.

“Tax exemptions for the donation could attract bigger donors from corporations.

Currently, the official government debt is at RM686.8 billion, which is 50.8% of the Gross Domestic Product.

The Institute for Democracy and Economic Affairs (IDEAS) recently said the debt situation in Malaysia was “manageable”.

IDEAS CEO Ali Salman had said the country’s annual budget was “very adequate” to repay debts, with 11% of the budget allocated.

He had said the only time to worry would be if 30% of the budget went towards loan repayment. - FMT