MALAYSIA’S shocking RM1 trillion debt comprises RM686.8 billion in federal debt, RM199.1 billion in guarantees, and RM201.4 billion for public-private partnership projects, said Finance Minister Lim Guan Eng.

His disclosure was a response to a statement by former prime minister Najib Razak yesterday that the figure would “unsettle the financial markets, alarm the credit rating agencies, and investors’ confidence in our institutions, such as Bank Negara Malaysia”.

“We want to establish the true baseline on the state of financial affairs, diagnose the problems, and then prescribe all necessary remedies,” Lim said in a statement today.

He said the official federal government debt at RM686.8 billion was 50.8% of the gross domestic product (GDP) and the government was committed to paying guarantees for entities unable to service debts, amounting to RM199.1 billion, or 14.6% of the GDP.

Committed government guarantees include entities such as Danainfra Nasional Bhd (RM42.2 billion), Govco Holdings Bhd (RM8.8 billion), Prasarana Malaysia Bhd (RM26.6 billion), Malaysia Rail Link Sdn Bhd (RM14.5 billion), as well as an estimated RM38 billion for 1Malaysia Development Bhd.

“Based on the two items above, the federal government debt would amount to RM885.9 billion. This represents 65.4% of the GDP as highlighted by Prime Minister Dr Mahathir Mohamad yesterday,” he said.

Lim said Putrajaya was also committed to leasing payments, including rental, maintenance, and other charges, for “a whole list of public-private partnership projects such as the construction of schools, hostels, roads, police stations, hospitals, and so on”.

He noted that the lease commitments were designed specifically to circumvent the federal government guarantee and debt limits amounting to RM201.4 billion, or 14.9% of GDP, totalling the debt bill to RM1,087.3 billion, or 80.3% of GDP as of December 31, 2017.

“However, let me emphasise that the obligations and financial commitments of the federal government are unchanged.

“The only change is that the new federal government has decided to call a spade a spade. This new government puts the interests of the people first.

“Hence, it is necessary to bite the bullet now and work hard to solve our problems, rather than let it explode in our faces at a later date,” Lim said.

Lim said the decision to tell the truth “may unnerve” Najib, but said that he believed that recognising the nation’s debt situation will enable the federal government to “take concrete actions to regularise and strengthen our financial state”.

He said the numbers were totalled by Treasury officials led by its deputy secretary-general, Siti Zauyah Mohd Desa.

“This was done without any interference from politicians attempting to manipulate the figures and hide our real debt and obligations.

“Having engaged intensively with the Treasury team over the past few days, including listening to various constructive proposals and suggestions to resolve these difficult challenges, I am confident that we can overcome them.”

Lim said that the fundamentals of the economy remained strong.  

“The financial sector is stable, the banking sector is well-capitalised, and there is sufficient liquidity in the market.

“Together with the commitment of the new government as well as the support of Malaysians all over the country, we will definitely succeed in saving our country,” said Lim. – May 24, 2018.