Govt to undertake mitigation measures, ensure risk exposure contained

In mitigating the crisis, the Malaysian government has launched a series of stimulus packages and recovery plan.

Subsequently, the fiscal deficit target for 2020 has been revised from the initial 3.2 per cent of gross domestic product (GDP) to six per cent, the Ministry of Finance (MoF) said in its 2020 Fiscal Outlook and Federal Government Revenue Estimates report released today.

It said the government had also enacted a new legislation to temporarily lift the statutory debt ceiling to raise additional borrowings to finance the packages.

"These measures have increased fiscal risks in terms of higher financial obligations and exposure.

“Nevertheless, the government is committed to undertake mitigation measures to ensure the risk exposure is contained," it said.

The MoF estimated that the federal government’s total debt and liability exposure to be at RM1.25 billion or 87.3 per cent of GDP as of end-Sept 2020.

The debt and liabilities exposure comprised federal government debt and other financial obligations, such as committed guarantees, 1Malaysia Development Bhd’s (1MDB) debt and other liabilities, including estimated cash commitments, it said.

As at end-Sept 2020, total outstanding Government Guarantee (GG) stood at RM289.8 billion or 20.1 per cent of the GDP, compared to RM275.4 billion or 18.2 per cent of the GDP as of end-2019.

"The increase was mainly attributed to new issuances by DanaInfra and Prasarana to finance public transport infrastructure projects, as well as financing raised by the Public Sector Home Financing Board (LPPSA) to fund housing loan facility for civil servants," it said.

Meanwhile, the unsustainable heavily-indebted business operating model adopted by 1MDB necessitated the government’s intervention in restructuring 1MDB's businesses.

The MoF said the government also had to assume the company’s financial obligations, adding that 1MDB’s outstanding debt is estimated to be at RM32.3 billon as at end-Sept 2020.

From April 2017 up to Sept 2020, the government has financially assisted 1MDB in the form of loans and advances totalling RM9.4 billion to meet 1MDB's financial commitments and debt servicing.

The government is also in the pursuit of recovering several assets related to 1MDB’s financial trail.

As at end-Sept 2020, RM13.4 billion of assets linked to 1MDB have been recovered and merged into a dedicated trust fund administered by the MoF.

On other liabilities, the MoF said as at end-Sept 2020, the government has committed an estimated RM119 billion for 97 public-private partnership (PPP) projects up to year 2047.

Meanwhile, private finance initiative (PFI) liabilities is estimated at RM49.5 billion.

Moving forward, the government will continue to closely monitor and scrutinise its overall fiscal exposure to identify the risks and subsequently formulate a mitigation plan, it said.

"The government will also emphasise on a more systematic data consolidation and comprehensive reporting to provide a holistic view of debt and liabilities exposure," the ministry said.