Finance minister Tengku Zafrul Aziz told the Dewan Rakyat that the debt service coverage ratio for 2021 will hit RM39 billion and will go up to RM43.1 billion next year.
“As told by some MPs, for every RM1 revenue (earned) we have to pay 18 sen in interest, this is not principal debt,” he said.
Debt service coverage ratio compares operating income available with debt servicing for interest, principal and lease payments. It is a benchmark used to measure the ability to produce enough cash to cover debt payments.
Tengku Zafrul was winding up his ministry’s Temporary Measures for Government Financing (Coronavirus Disease 2019) Amendment Act 2021 bill tabled today. The bill was passed with a voice vote.
The government sought an additional RM45 billion from RM65 billion to RM110 billion under the Covid-19 bill. The federal government also sought to increase the statutory debt limit from 60% to 65% of GDP.
Tengku Zafrul said the government’s plan was to reduce the deficit by 2025 to 3%-3.5%, as part of the government’s mid-term plan.
“We cannot shut the engine but we need to slowly, gradually meet our targets of 3% to 3.5%. This is through the mid-term fiscal framework and fiscal responsibility act,” he added.
He was replying to Nga Kor Ming (PH-Teluk Intan) who said the government’s debt and liability would hit RM1.3 trillion after the bill is approved.
Nga said it was equivalent to each Malaysian being in debt to the tune of RM40,000 and asked for a roadmap to reduce the debt as Malaysia may face a lower credit rating if such debts continue.
Nga also raised concerns over leakage and wastage of funds under the 11th Malaysia Plan as raised by the Auditor-General’s report.
Some of the projects, he said, were not even 50% complete but 94% of the allocation had been used.
“What action can be taken to ensure due diligence and that money is well spent without wastage,” Nga asked.
Tengku Zafrul replied that it would be monitored by various implementation agencies.
Furthermore, he said, the RM45 billion under the bill would be monitored by both sides of the political divide as agreed under a memorandum of understanding signed between the government and Pakatan Harapan.
Tengku Zafrul also said RM30 billion of the RM45 billion and from the 2022 budget would be kept aside for SMEs to help them jumpstart the economy. The remainder will be used for the health ministry and for lower income groups.