Should the federal government’s debt grow
at a rate of RM50 billion annually, it could reach RM1 trillion in 2020,
said independent think-tank Research for Social Advancement (Refsa).
This mind-boggling scenario was explored in Refsa’s focus paper on Budget 2012, which warned that Vision 2020 could “crumble into broken dreams” unless the government exercises financial prudence.
The current deficit stands at RM437 billion, which Refsa points out is more than double the RM217 billion budget deficit reported in 2004.
“Put another way, the government has added on more debt in the six-and-a-half years since 2004 than in the 47 years following Merdeka,” reads the paper.
Between 2007 and 2011, the deficit has been growing at about RM34 billion annually on average.
But assuming this increases to RM50 billion in additional debts annually, Malaysia can expect its total debt to double again by 2020 to RM1 trillion.
“That is 1 with 12 zeros behind it - RM1,000,000,000,000,” reads the paper.
Assuming an interest rate of five percent, interest charges alone would be RM50 billion per year.
“That is about the cost of the MRT project. We haven’t even started thinking about repaying that debt yet,” said Refsa.
Contrast with Pakatan’s budget
With about 1.7 million taxpayers out of a workforce of 12 million, RM1 trillion works out to RM590,000 per taxpayer.
“With 80 percent of the households currently earning just RM2,500 per month on average, and with oil reserves dwindling, it is hard to see how that can be repaid,” the think-tank said.
Refsa
criticised the government for failing to take steps to reduce the
deficit while pointing out that Pakatan Rakyat’s shadow budget had aimed
to reduce the deficit by RM10 billion and lowering expenditure.
The shadow budget outwardly appears similar to the government’s. Pakatan’s 4.4 percent projected deficit is not far from the government’s 4.7 percent. However, the key difference is in the details.
“Pakatan has more conservative revenue and GDP assumptions. It plans to spend less than the government, but more effectively.
“Comparing like-with-like, that is taking Pakatan’s expenditure forecasts but the government’s revenue and GDP growth projections, the Pakatan deficit would be just 3.7 percent.”
Refsa has been publishing a series of downloadable focus papers before and after Budget 2012, seeking to educate Malaysians on how tax ringgit are being spent.
The think-tank is led by Teh Chi Chang who spent 16 years as a financial analyst and was formerly DAP secretary-general Lim Guan Eng’s economic advisor.
The focus paper includes a disclosure statement stating that Teh was an “expert independent contributor” to Pakatan’s shadow budget document.
“Neither he nor Refsa received any payment for his services, not even reimbursement for out-of-pocket expenses such as parking, toll and petrol."
This mind-boggling scenario was explored in Refsa’s focus paper on Budget 2012, which warned that Vision 2020 could “crumble into broken dreams” unless the government exercises financial prudence.
The current deficit stands at RM437 billion, which Refsa points out is more than double the RM217 billion budget deficit reported in 2004.
“Put another way, the government has added on more debt in the six-and-a-half years since 2004 than in the 47 years following Merdeka,” reads the paper.
Between 2007 and 2011, the deficit has been growing at about RM34 billion annually on average.But assuming this increases to RM50 billion in additional debts annually, Malaysia can expect its total debt to double again by 2020 to RM1 trillion.
“That is 1 with 12 zeros behind it - RM1,000,000,000,000,” reads the paper.
Assuming an interest rate of five percent, interest charges alone would be RM50 billion per year.
“That is about the cost of the MRT project. We haven’t even started thinking about repaying that debt yet,” said Refsa.
Contrast with Pakatan’s budget
With about 1.7 million taxpayers out of a workforce of 12 million, RM1 trillion works out to RM590,000 per taxpayer.
“With 80 percent of the households currently earning just RM2,500 per month on average, and with oil reserves dwindling, it is hard to see how that can be repaid,” the think-tank said.
Refsa
criticised the government for failing to take steps to reduce the
deficit while pointing out that Pakatan Rakyat’s shadow budget had aimed
to reduce the deficit by RM10 billion and lowering expenditure.The shadow budget outwardly appears similar to the government’s. Pakatan’s 4.4 percent projected deficit is not far from the government’s 4.7 percent. However, the key difference is in the details.
“Pakatan has more conservative revenue and GDP assumptions. It plans to spend less than the government, but more effectively.
“Comparing like-with-like, that is taking Pakatan’s expenditure forecasts but the government’s revenue and GDP growth projections, the Pakatan deficit would be just 3.7 percent.”
Refsa has been publishing a series of downloadable focus papers before and after Budget 2012, seeking to educate Malaysians on how tax ringgit are being spent.
The think-tank is led by Teh Chi Chang who spent 16 years as a financial analyst and was formerly DAP secretary-general Lim Guan Eng’s economic advisor.
The focus paper includes a disclosure statement stating that Teh was an “expert independent contributor” to Pakatan’s shadow budget document.
“Neither he nor Refsa received any payment for his services, not even reimbursement for out-of-pocket expenses such as parking, toll and petrol."
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