Breaking The RM100 Billion Mark

Posted by M ws On Wednesday, October 17, 2012 2 comments
For many months now, I only look at headlines in news portals and choose to read only what I feel in relevant, important and worth my time. This morning, I came across the following article which I am sharing for the benefit of those who have yet to subscribe to Malaysiakini.

 Gov't-guaranteed debt breaks RM100bil mark by Kuek Ser Kuang Keng of Malaysiakini

The accumulated federal government-guaranteed loans climbed by RM19.85 billion or 20.5 percent in 2011, breaking the RM100 billion mark for the first time to hit RM116.76 billion, reveals the Auditor-General's Report 2011.

The figure has doubled in four years and experienced a rapid rise since 2008. The hike from 2008 to 2011 was a whopping 69 percent or RM47.52 billion.

Government-guaranteed loans are loans taken by statutory bodies and companies but guaranteed by the federal government under the Loan Guarantee (Bodies Corporate) Act 1965.

These loans are separate from the federal government debt and are not reflected in the annual budget, and are often described as part of the country's "hidden debt".

According to the audit report, the federal government debt in 2011 hit RM456.12 billion, or 51.8 percent of the gross domestic product (GDP), a few percentage below the legislated debt ceiling of 55 percent.

 Source: Malaysiakini

If the RM116.76 billion of government guaranteed loans are included into the federal debt, the total debt would be RM573 billion or 65 percent of the GDP, which is way beyond the debt ceiling.

However, the Finance Ministry has argued that the government does not take contingent liabilities such as off-budget borrowing into account in its debt-to-GDP ratio as these are not "realised debts".

Alarming rise in PTPTN loans

The Auditor-General's Report points out that the RM116.76 billion accumulated in 2011 made up the total outstanding domestic and external loans of two statutory bodies and 23 government-linked companies that Putrajaya guaranteed for as at the end of 2011.

The increase of RM19.85 billion from 2010 was largely due to the rise in loans for the National Higher Education Fund Corporation (PTPTN), plantation giant Felda and Jambatan Kedua Sdn Bhd.

The government also guaranteed new loans taken by Syarikat Govco Holdings Bhd, Pengurusan Air SPV Bhd and SRC International Sdn Bhd in 2011.

PTPTN, which has been raising its loans significantly since 2007, took up 17 percent or RM20.35 billion of the total guaranteed borrowings, followed by Pengurusan Air SPV Bhd (RM9.5 billion or eight percent) and Felda (RM3.42 billion or three percent).

The outstanding borrowings of PTPTN have more than doubled, from RM7.5 billion in 2007 to RM20.35 billion in 2011, the highest increase among all federal government-guaranteed borrowers.

Source: Here

2 comments to Breaking The RM100 Billion Mark

  1. says:

    UP41 Happy families are all alike; every unhappy family is unhappy in its own way - Leo Tolstoy

    Greece , Spain ,and may be in future Malaysia, reach the bankrupt state in different ways but the result still the same - the rich will still enjoys while the normal ppl suffer in a chaotic, high crime rate, social unrest environment.

    Will we reach the situation where nobody want our bonds ????

  1. says:

    light MWS,

    'Contingent liabilities', 'off-budget borrowing', 'realised debts', 'legislated debt ceiling'. Yes, all these self-importance, grand-sounding words used to confused us ordinary, decent people.

    What is contingent but an event that is likely to happen. It is not an impossibility and could be said to be dependent on certain other (global?) events happening either by chance (though some would say nothing happens by accident) or unseen and unpredictable causes. A more pertinent question should perhaps be what this debt is 'contingent' upon?

    Off-budget borrowing? Does this mean the PTB does not have to repay the loan if those borrowers default on their payments? If i become a loan guarantor for a friend, and if he misses his instalments a few times, now why does the bank chased after me as his loan is 'off my budget'. Of course, i'm a simpleton and only using a crude example.

    As for 'realised debts', is it an oxymoron? Excuse me for my ignorance, but do you mean the loan is not disbursed out to the borrowers since it has not come into "realisation". So they're not real is it, as my understanding of 'realisation' is making something real, no? And so cannot take them into account when poking the calculators for the debt-to-GDP ratio lah.

    Lastly but certainly not least, 'legislated debt ceiling'. Of course the debt ceiling has always been legislated by the PTB since before i was born, i think. i don't think me or anyone i know can legislate the debt ceiling ourselves. It is not like the PTB cannot "legislate" the debt ceiling higher when there's a need for it, unlike me and my bunch of friends who cannot even legislate our personal credit ratings higher so that we can borrow more money from the bank to finance our party lifestyle.

    Sighs. Some guys have all the luck...

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