THE federal government has a ceiling for its debt, that is, it cannot exceed 55% of annual gross domestic product (GDP), Prime Minister Dr Mahathir Mohamad said at the Dewan Rakyat this morning.

He said in the past, the government had never gone beyond the ceiling rate.

Dr Mahathir said the government previously recorded debts of several billion ringgit, but 1Malaysia Development Bhd, which is wholly owned by the government, had incurred debts above the ceiling.

“The company’s debt exceeded the ceiling because it is not bound by the government debt ceiling. When it owed money up to RM42 billion, the government – as its 100% owner – has to be responsible for the debt.

“The 1MDB debt, for instance, is passed back to the government and the Finance Ministry in the end, and this debt is now the government’s debt. That is why the government debt is now up. Rules were not followed when loans were taken.”

The 1MDB sovereign wealth fund was the brainchild of former prime minister Najib Razak. Billions were allegedly siphoned from the fund for the enrichment of certain individuals.

Dr Mahathir said this in replying Noor Azmi Ghazali (Independent-Bagan Serai), who asked the government if it would set a national debt ratio as an indicator of the country’s economic growth.

The MP from Perak had argued that debts might not be good indicators, citing advanced nations, like Singapore and Japan, that had high debt ratios.

The prime minister also replied to Perak MP Ngeh Koo Ham (PH-Beruas), who wanted to know if the government would still allow state companies to borrow funds for development without going through Parliament.

Dr Mahathir said the federal government would bear huge debts if wholly owned government firms took loans and recorded losses, as the companies’ debts would then have to be settled by the government.

He said the present administration was trying to reduce the country’s RM1 trillion debt by discontinuing “very expensive, useless projects”.

“These figures will be tabled in the coming national budget,” he said.

Earlier, Dr Mahathir answered an oral question by opposition leader Ahmad Zahid Hamidi (BN-Bagan Datuk) on the national debt.

The former deputy prime minister from Umno said that the debts of the previous pre-Najib administration were even higher than what the present PH government claimed to be facing today.

Dr Mahathir said back when he was first prime minister from 1981 to 2003, the federal government had never incurred debt even close to RM1 trillion.

He said the debt was no more than RM300 billion, which was 27% of GDP at the time, adding that Zahid could check the annual reports from 1980 and 1990.

“If Bagan Datuk can show us different figures, I will be grateful. I was there for 22 years, so I more or less know the development, financial and debt figures.

“We never had a debt of RM42 billion. Never. If you have proof, please show us. We also never had a debt of more than a trillion ringgit. We had never even heard of the word ‘trillion’ before. 

“But we now hear we have a more than RM1 trillion (debt). I don’t know if RM1 trillion is less than RM300 billion… I don’t know, but to me RM300 billion is less than a trillion.” – July 23, 2018.