This article first appeared in The Edge Malaysia Weekly on May 19, 2025 - May 25, 2025
Donald Trump’s swing through Saudi Arabia, Qatar and the United Arab Emirates last week generated hundreds of billions of dollars in trade deals for the US, much to the envy of many.
But apart from trade deals, the world also gawked at the trillions of dollars that the three mega oil-rich countries are spending on transforming their economies away from being dependent on fossil fuel. A contributor even wrote in The Edge’s Forum pages that Malaysia should be as brave as the Saudis in monetising our oil and gas assets (Read “What Saudi Arabia’s fiscal overreach can show Malaysia” article here).
Basically, the opinion piece argued that Malaysia should borrow and invest now for the transformation goals it has in mind, such as green energy and digital transformation. Fiscal deficits and public debts should not always be viewed negatively, as they can be used to make big bets on the future. The article further says that “playing it safe guarantees mediocrity”.
While the argument put forward is food for thought, we advise caution. Here are five reasons:
- Malaysia’s debt-to-GDP ratio is at least double Saudi’s 30%;
- Malaysia spends 15% of its revenue on debt servicing, five times Saudi’s 3.1%;
- Malaysia’s oil reserves of 2.7 billion barrels are about 1% of Saudi’s 268 billion barrels;
- Our foreign reserves of US$118.7 billion are less than 30% of Saudi’s US$435.4 billion; and
- We have a brain drain (for reasons we have articulated many times before) whereas Saudi is attracting global talents to help execute its ambitions.
The ability of nations to borrow and the interest rate they pay is determined by their balance sheet — and Malaysia’s is not in the best of health. Running large fiscal deficits for too long could also lead to big current account deficits and a weaker ringgit that spells higher inflation.
Equally important, do we have the capacity to make the right and great decisions to take on such big bets?
Unfortunately, our track record is one littered with financial disasters, the most recent and biggest of them all being 1Malaysia Development Bhd (1MDB).
By rashly spending our oil and gas reserves, we may end up like Venezuela, possibly a country with larger oil reserves than Saudi. Ruined by decades of mismanagement and corruption, it is an economic basket case today, with thousands of its citizens fleeing malnutrition and unemployment.
Malaysia should invest prudently in what matters and not put future generations of its citizens at risk through overambition and reckless big bets.
Save by subscribing to us for your print and/or digital copy.
P/S: The Edge is also available on Apple's App Store and Android's Google Play.