KUALA LUMPUR (Jan 18): Having a high national debt to gross domestic product (GDP) ratio is not unusual; however, the government must ensure that the country's assets are greater than its debt obligations and that the borrowed money can generate future income, said a senior economics lecturer from the University of Malaya.
Goh Lim Thye said the people should not be overly concerned about a high level of national debt provided that the money is utilised effectively to reinvest and generate future income.
"For example, developed countries such as Singapore, the United States, and Japan have a very significant level of national debts, but if you can use the funds properly and generate future earnings, then it should not be a concern.
"If you look at Singapore, it has a debt-to-GDP ratio of 187%, while Malaysia has a ratio of around 80% (including liabilities), which isn't too bad, but the only thing we don't have in common is [in terms of] total assets.
“Singapore's total assets actually exceed the amount borrowed. So as policymakers, we must consider how to accumulate assets and earn income, then we should be fine," he told Bernama TV's The Brief programme on Wednesday (Jan 18) on the national debt.
On Tuesday, Prime Minister Datuk Seri Anwar Ibrahim revealed that Malaysia's national debt, including liabilities, has reached RM1.5 trillion and is already more than 80% of the country's GDP if liabilities were included. Anwar said the issue should be addressed urgently and indicated that the figure suggested that Malaysia's budget deficit would widen further than the earlier estimate of 5.8% of GDP for 2022.
When asked how the debt level might affect ordinary citizens, Goh stated that countries must be able to generate income to repay the principal as well as service the interest; however, if a country is unable to do that, this would be a concern.
"If that scenario happens, future generations might be affected when the country is not able to pay back the loan or to service the interest payments that we have accumulated now," he added.
Goh emphasised that by increasing national productivity and focusing on extending the revenue base, Malaysia will be able to service its debts and, eventually, solve its high debt situation.
"One option is to enhance productivity and tax base collections. While everyone is concerned about paying more taxes, there are actually many aspects when it comes to increasing the tax base revenue.
“Companies will be able to develop more output and sell more items as productivity increases, which will inevitably result in increased tax collections.
"Secondly, we must improve our competitiveness. If you look at the global competitiveness index, Malaysia ranks 32nd out of the 60 or 66 countries listed.
“Our competitive rate has reduced around seven rungs compared to the previous year so increasing competitiveness and productivity [should] be the approach moving ahead," he said.