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Thursday, August 1, 2013

Putrajaya must cut waste, deficit to avoid “financial quicksand”, says Tony Pua


Putrajaya must cut wasteful expenditure, reduce the deficit and reform practising "off-balance sheet financing" to avoid Malaysia going into a "financial quicksand", DAP's Tony Pua said today.
The party publicity chief said Prime Minister Datuk Seri Najib Razak must already announce immediate measures to boost confidence that Putrajaya was serious about slashing extravagance and deficit.
"In addition, he must signal to the markets that in the 2014 Federal Government budget expected to be announced in October 2013, he will cut down on unnecessary expenditures such as in “Supplies and Services” which have increased drastically from RM23.8 billion in 2010 to RM33.7 billion in 2013," Pua said in a statement in Kuala Lumpur.
The Petaling Jaya Utara MP made the call when commenting on global agency Fitch Ratings downgrading Malaysia’s credit rating outlook from "stable" to "negative" due to the country’s poor handling of its public finances.
"We call upon the Government to follow the reform of its outdated accounting practice of 'off-balance sheet financing' and recognise fully these hidden debts as the Federal Government debt commitments.
"Without proper accountability, the apparent abuse by the current government in circumventing the legislated 55 percent limit of Federal Government debt by recklessly issuing debt guarantees to wholly-owned government agencies or GLCs, will only lead to Malaysia finding itself trapped in financial quicksand sooner or later," Pua said.
The DAP leader also said Najib, who is also the finance minister, must announce concrete plans to ensure that all privatisation projects are tendered competitively amd that all government procurement are open and transparent.
On Tuesday, Fitch Ratings cautioned that Malaysia’s credit ratings would not improve unless the government takes remedial measures and carry out reforms.
Pua pointed out that Fitch had already “stated the obvious” last December when it said that the country’s heavy dependence on off-balance sheet funding questions the "meaningfulness of the 55 percent of Gross Domestic Product (GDP) federal debt ceiling".
Analysts from CIMB Equities Research had previously said that the Big 3 rating agencies – Fitch, S&P and Moody’s – would downgrade Malaysia’s credit rating outlook if the government made no indication after the election that it would conduct fiscal reforms on subsidies, taxes and spending.
While the official government statistics show that the country’s debt is only at 53.7 percent of its GDP, Pua argues that the true figure is much higher than that.
“The number does not include the sky-rocketing quasi-government debt or our contingent liabilities,” he said.
“In reality, if both official government debt and guaranteed debt are put together, our debt to GDP ratio will be a much higher and worrying 68.9%.”
Malaysia’s official debt figure has gone up 13% since 2009 and Pua noted that it did not include hidden debts from projects that have loans backed by the government such as the RM50 billion MRT project that is not listed in the country’s budget.
“By channeling development expenditure to off-budget measures, it enables the Najib administration to paint a false perception of financial prudence,” he said.

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