Direct debt increased because Harapan gov't refuses 'off-balance sheet financing'

The Pakatan Harapan government's refusal to resort to "off-balance sheet financing" to cover up dubious debts is why Malaysia's direct debt has increased from 50.1 percent of the GDP in 2017 to 51.2 percent in 2018.

At the same time, Finance Minister Lim Guan Eng also pointed out that the government's total debt and liabilities have been reduced from 79.3 percent of the GDP in 2017 to 75.4 percent in 2018.

"Direct debt rose... to directly fund the fiscal deficit, without the government resorting to off-balance sheet financing to cover-up dubious debts as practiced by the previous administration," he said in a statement today.

Meanwhile, the committed government guarantees have increased due to infrastructure projects which are already in ,such as the MRT2, LRT3 and the Pan-Borneo Highway, he added.

However, Lim reminded that the government has since renegotiated the costs of these mega-projects to reduce their future committed government guarantees.

 A substantial portion of the country's RM1.087 trillion debt and liabilities, he said, were "hidden" by the previous administration.

"(They) had deceitfully kept under wraps or disguised as off-balance sheet items," Lim said.

These hidden debt and liabilities include RM38.3 billion worth of 1MDB debt which the BN administration was "secretly servicing", he said.

The other liabilities of RM260.1 billion involved off-balance sheet government expenditure, Lim said, which were masked as "public-private partnership (PPP)" or "private finance initiatives (PFI)", though the costs, risks and obligations fell entirely upon the government.

"Hence, the PPPs and PFIs were abused by the then BN government to give the false perception of low budget deficits and a correspondingly lower level of perceived debt," he explained.

On the other hand, the Harapan administration has been praised by international rating agencies and investment analysts for improvement in terms of transparency and good governance, he said.

At the same time, the government is still actively pursuing the recovery of assets for funds misappropriated by 1MDB globally, he said.

"Despite these challenges inherited from the previous government, we remain committed towards fiscal consolidation, while at the same time ensuring that Malaysia remains on a sustainable growth path, despite the weak global economic environment," he said.