Grow the economy and stop fretting about debt, says economist

Sheridan Mahavera Sheridan Mahavera Updated 7 years ago · Published on 7 Jul 2018 6:11PM · 11 Comments

Employees Provident Fund senior official Nurhisham Hussein says the trick is to grow the country’s overall income each year so that the government will have more than enough money to service its borrowings. – The Malaysian Insight file pic, July 7, 2018.

DESPITE the new Pakatan Harapan government’s preoccupation with the nation’s RM1 trillion debt, a renowned economist said it was far better to focus on economic growth.

Employees Provident Fund economist Nurhisham Hussein said as long as the country maintained its debt payments and kept the total under control, the amount would come down.

The trick is to grow the country’s overall income each year so that the government will have more than enough money to service its borrowings, said Nurhisham, who heads EPF’s Economic and Capital Markets Department.  

“You keep the absolute debt amount stable, even if it’s one trillion,” Nurhisham said on the sidelines of a World Bank Group event in Kuala Lumpur.   

“If the economy is growing in nominal terms at 6% to 7% a year, the amount of debt will come down automatically in five to six years,” said Nurhisham, a panellist at the World Bank Group’s launch of the Malaysian economic monitor.  

“You don’t have to actually cut the level, but keep it stable and the economy growing.

“Even if you have a (budget) deficit of 3% per year, but the economy grows at 7% or 8%, the level of income will grow at a faster level than debt. It’s sustainable.”

The country’s massive debts have come into focus since PH took over the government after GE14.

The PH administration said the country owed creditors RM1 trillion both in direct government and guarantees it undertook from state-linked entities, such as 1Malaysia Development Bhd (1MDB).

This is in direct contrast to Barisan Nasional’s claims that the debt was only RM687 billion, a figure which experts have long disputed.  

Finance Minister Lim Guan Eng said the government’s huge debt obligations have forced it to postpone some of PH’s signature policies.

These include abolishing highway tolls and providing free tertiary education at public universities.

What the government should not do, said EPF’s Nurhisham, is reduce the amount of money it spends on the economy, as that slows growth and hampers the ability to pay off debt.

“If you spend too much attention on paying debt, then you either raise taxes or reduce the amount of money you are putting into the economy. That puts pressure on the private sector and households.

“So, you get slower growth, and even if you reduce the debt, the (debt-to-income) ratio doesn’t fall.

“Historical examples all point to keeping growth going at all costs. The debt will take care of itself.” – July 7, 2018.

Sign up or sign in here to comment.

Comments

  • I agree provided the country allowed unfettered economic freedom to all its citizens yet the ultra racist is going backwards to century-ago racist policies. Look at China. Though politically authoritarian, its economy is laissez faire. Its growth is phenomenal.

    Posted 7 years ago by Malaysian First · Reply

    • Cina is different.Every chinaman is producing something in his backyard and exporting.In Malaysia half the population are gov.employees and the rest talk talk talk politics and religion.Also trying to bring the gov.of the day down.Petty bickering.So what to export!God bless Malaysia and Dr Tun M and his cabinet.

      Posted 7 years ago by Rajasingam Sinnappop · Reply

    • Very true..happening now.. with Zakir Naik advice

      Posted 7 years ago by Alex Pereira · Reply

  • easier said than done. see the USA economy. Trillions debts and spinning out of control. this economist is damned stupid. Is better to control both sides for better chance of success. reduce debts and grow economy, simple.

    Posted 7 years ago by Haha Hehe · Reply

  • How about EPF giving me a loan of RM5 million to buy a property and my monthly income is RM100,000 per year. I also promise to work very hard and promised to increased my income by 10% every year. And may be after 2 years I need another loan of RM500,000 to buy a car. Is that okay with you and if so I will send in my application for your approval. Thank You.

    Posted 7 years ago by Chong Peng Lim, Patrick · Reply

  • Agreed. As long as the economic growth rate is higher than the cost of borrowing. However, we are also concerned about several issues. One is the lack of transparency over how the projects were approved and tendered out. Two, the concern over the amount of kickbacks or bribes paid or received. Three who were the cronies who profited illegally from these ventures. Four, some of the projects were apparently financed at high interest costs. Why? Five, why were monies paid for some of the projects which did not reflect amount of work accomplished. Six, why were the cost of the projects so astronomically high when they could have been tendered at a lower cost? So? We should not be worried? Serious?

    Posted 7 years ago by Justice For All · Reply

  • Another Najis's appointee justifying his existence... Just cut all the trees, somehow there will keep growing.
    Where was this Economist trained - MARA??

    Posted 7 years ago by Led Nsolarpv · Reply

  • He makes sense. Grow the economy! Problems grow larger in proportion to the attention spent on it. Spend the attention on solution!

    Posted 7 years ago by Jay Seeva · Reply

  • What quality of economist is this...how can the debt level be brought down just by having higher GDP growth and still continue to have budget deficit? The govt deficits for 21 years is fuelled by debt..continued deficits will cause the debt to increase..

    Posted 7 years ago by Naresh Neelakandan · Reply

  • Thats right! Stop persecuting Najib and all the UMNO members. There is no benefit to hang dirty laundry or tell the whole world how bad Malaysias economy is about. It is most important to hide all this and tell them how good Malaysia is and how best the foreigners can benefit from Malaysia as they buy more of our land so we can grow more of our economy bit by bit. Soon, the economy will be so robust and strong that we can have another 100 years of National Economic Policy where Ketuanan Melayu can reign supreme over the Chinese and Indians and we can offer billion ringgit salaries to every Malay and everyone can be a director, a CEO, a chairman of every company in Malaysia, with benefits of big houses and big BMWs and Lexus cars given to them. So Lim Guan Eng, stop all this nonsense of writing in Chinese, which is very seditious and always hurt the feelings of the kind hearted Malays, and focus on making more and more money for us to spend.

    Posted 7 years ago by Steve Kok · Reply

  • Hmmm.. Why don't you join Tony Pua and provide free service to MOF or your country.

    Posted 7 years ago by Wire bug · Reply