KUALA LUMPUR, 26 September 2019 – The Federal Government is on track to meet its deficit target of 3.4% of 2019 Gross Domestic Product (GDP), said Lim Guan Eng.
The Minister of Finance also stated that RM52 billion worth of net direct debt will be raised for development expenditure purposes this year.
Lim said the planned RM52 billion fiscal deficit will translate into 3.4% of 2019 GDP.
“The Government is on track to meet the 3.4% target, which is lower than the 3.7% of GDP fiscal deficit or RM53 billion recorded in 2018,” Lim stated.
The funds raised are entirely allocated for the purposes of development expenditure such as roads and infrastructure for the public.
Lim also stated that allegations that the net direct debt raised to date, or RM58 billion as 26 September 2019, has already exceeded the budgeted RM52 billion for the full year are baseless and false.
“First and most importantly, the government issues and redeems its debt and securities regularly each year based on its yearly debt issuance and redemption schedule,” he stated.
“For the whole year, the Government plans to raise RM135.7 billion worth of gross direct debt while redeeming RM83.3 billion in return. Specifically, RM38.8 billion has been redeemed in the January-August 2019 period and another RM44.5 billion will be redeemed in the September-December 2019 period,” said Lim.
“Hence, looking merely at the current net direct debt figure without taking into consideration the planned redemption of debt and securities for the remainder of the year would give a grossly inaccurate picture of the country’s debt levels,”
“It deliberately distorts the picture by looking at the monthly picture instead of the entire year, as the annual budget is done on a yearly and not monthly basis,” the Minister of Finance explained.
Secondly, issuance and redemption of debt necessarily fluctuates throughout the year in order to regularise the cashflow of the Government.
Lim said the issuance of debt will always be proportionally higher in the first half of the year because the revenue collection for the Government is always lower in the same period.
“Correspondingly, the redemption of debt will always be higher in the second half of the year because the Government will collect higher revenues during this period,” he said.
This has been the customary financial practice for the Government even in the past, and those claiming otherwise despite being part of the previous government is being dishonest.
“Bear in mind that revenue collected will be also be used to pay off our existing debt and liabilities, such as 1MDB debt. The Pakatan Harapan government is committed towards fiscal consolidation to reign in the excessive debts chalked up by the previous regime,” Lim added.