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National Debt Malaysia: What You Should Know About It!

Updated 30 Jul 2020 – By Faiz Rahim


Have you guys noticed that discussion regarding the country’s national debt on social media akan pop up every now and then? The issue comes up, people talk, move on, and repeat (cam biasa lah)...

Well, recently, it all started when a politician tweeted this following the news article of the Finance Minister saying that the country’s deficit is expected to double in 2020. Just so you know, the national debt is also usually known as government debt/borrowing.
 

 
 

As expected, not many people share similar views. Some of them said the concept of the national debt is different from individual debt, which makes sense lah kan because they’re two different things? You can see some of the opposing comments in the following pictures below.
 

 

 

Source: Twitter

So, admin pun interested lah to write on this issue. Before proceeding, you guys kena aware dulu that there are 2 types of national debts, which are:

  • Domestic debt: Debts that are made by the government in the form of bonds & sukuk to fund the government's development project every year.

  • External debt: Include government debts from foreign investors & private organisations, trade notes (similar to the invoice) that the government needs to pay within a certain period of time etc.

K, yall ready?
 


Without a doubt for sure, the national debt will affect the country’s policy, future, and economy. That’s just to show how important the issue is, k? 

From the total of Malaysia’s national debt from the past 4 years below, you can clearly see that the total amounts of national debt keep increasing over the years. Whew, talk about consistency!

Year Total National Debt (RM)
2016 RM648,476 million
2017 RM685,056 million
2018 RM741,049 million
2019 RM799,108 million
 



 

What’s the current situation?

For you guys information, the economic stimulus (PENJANA) that our Prime Minister announced in early June 2020 will make our deficit go double as it could go up to 5.8% to 6%. Basically, a deficit akan berlaku when the country has spent more than what they have received. In short, when our deficit increased, our national debt is likely to follow as well. Luckily, the Finance Minister assures that the country didn’t resort to external debts to finance both of the economic stimulus (PRIHATIN & PENJANA).

But when we think about it, what else can the government do especially in the current circumstances other than rolling out economic stimulus? Especially as we are in a combo of the global pandemic, unstable economy, some companies went bankrupt and many also have lost their jobs. Unprecedented times will need an unprecedented measure, yall agree tak?

ALSO READ: Post-MCO: Which INDUSTRIES Are Winning or Losing in M'sia?

 

Can our government repay its debts?

To repay back its debts, the government has 2 types of payment which are the interest and principal fees. To make it simple, the government needs to pay the interest fees within the period of time set and when it ends, they’ll need to pay the principal fees. 

For example, let’s just say that the government has a 15 years contract to repay the debts. Within the 15 years, the country will pay the interest fees which is usually 15% of the total country’s expenses. The government will only need to pay the principal fee once the 15 years end. Therefore brings the question, can the government pay in full the principal fee? 

Turns out, all of these times, whenever the government needs to pay the principal fee, they will just make a new debt to pay the old one. This ‘rollover’ process is a never-ending cycle of national debts...

In the meantime kan, the government kena pastikan yang the country’s economy continues growing and progressing. This is obvi the only way the government can control the national debt. 

Just imagine if the country’s national debt increases, but our economy continues to slow down. There must be something wrong somewhere in the way our country handles its finances.

One more thing, just because our national debt increases, it doesn’t necessarily mean that it’s bad. This is because we also look at it according to the gross domestic product (GDP) ratio. Here, let me break it down for you. 

If you guys study closely at the table below, you can see that our national debt for the last 4 years is still considered controllable. Why controllable, you ask?

Just take a peep at the ‘National Debt (%) to GDP’ column, our national debt is only a teenie little bit over 50%. This does show that our country’s economy and profit continue to grow time by time despite the increasing national debt. Simply put, we can still control and pay the national debt.

Year Total National Debt (RM) National Debt (%) to GDP
2016 RM648,476 million 52.7
2017 RM685,056 million 50.9
2018 RM741,049 million 51.2
2019 RM799,108 million 52.7
 

ALSO READ: Your Poor Spending Habits Don't Have to Control You, Here's How to Be Free!

Worries not. The national debt has its benefits...You guys might not know this but our country can only borrow with the aims of developing the nation. It could be for building hospitals, schools, and roads. So, if the money is handled well, we (the people) will be reaping the end benefits and therefore will improve our quality of life. And that is a good thing!

Besides that, the national debt will also influence the country’s monetary policy. As the government is going to work out plans to pay the national debt, they have to continuously strengthen the country’s monetary policy (annual budget). By doing that, the government will ensure the national debt remains under control. Like, how can we control it if the policy is not strong?



Also indirectly, as the economy progresses, the government will also work extra hard to attract more foreign direct investors to buy government bonds or make a foreign direct investment (FDI). So, when a new foreign investor investing, it’s highly likely that they have faith in our country’s potential and capabilities.

 

What can you do to contribute?

 

In a nutshell, it’s without a doubt that the country’s national debt will also increase this year especially with everything that has been going on. Covid-19, the unstable economy and the list goes on and on...

As a citizen, we can only hope the government can control the national debt well. There’s not exactly much that we can do except to continue supporting the country in these circumstances. How, you ask? 

Always #sapotlokal k? From there, we can help and support the government as the economy recovers. So, let’s do this together!
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