KUALA LUMPUR: The Fiscal Responsibility Act, which is expected to be tabled this year, will include several components such as capping the government's debt percentage at 65 per cent of the gross domestic product (GDP) and debt service charges at 15 per cent of the federal government's annual budget, said Deputy Finance Minister Datuk Seri Ahmad Maslan.
He said any government operating expenditure must be based on government revenue, but government's flexibility to borrow should be allowed for development expenditure.
"As for the national statutory debt ceiling, the government has raised the ceiling twice from 55 per cent to 60 per cent of GDP during the Covid-19 pandemic and then to 65 per cent until now," he said in a press conference at the Parliament lobby today.
Asked whether the government would reduce the debt ceiling to the previous level, he said the limit is still under discussion.
"Currently, the government debt to GDP ratio is 60.4 per cent compared to the debt limit of 65 per cent, and whether we will return to the 55 per cent or 60 per cent limit will be decided later," he said.
Ahmad Maslan said the expected timeline to table the Act has not been determined yet.
During the winding up debate on the royal address, Ahmad Maslan said the debt position had increased significantly to 60.4 per cent compared to 52.4 per cent of GDP in 2019 as the government had to take up additional loans to finance several economic stimulus and recovery packages with a fiscal injection amounting to RM110 billion aimed at dealing with the impact of Covid-19.
"In general, every year the government has to obtain loans to finance the fiscal deficit and refinance the existing principal debt (rollover), in addition to making new loans to cover development expenditure.
"These annual loans will increase the government's debt level as long as the government's financial position is in a deficit.
"However, financing development is very important as it is public investment with significant multiplier effect and high impact in driving economic growth and development of the country," he said.
As for the debt service charges, namely interest charges incurred on outstanding loans, Ahmad Maslan said as much as RM41.3 billion was spent in 2022, which accounted for 14 per cent of revenue collection.
"Debt service charges will continue to increase as long as the existing debt is not reduced, and the government needs to obtain new loans to finance the annual deficit.
"In the previous year, it was only between nine per cent and 11 per cent, and the surplus was used for projects for the people.
"However, we are going to use the money to pay the debt service charges, and hence fewer projects for the people would be carried out," he added.
-- BERNAMA
Bernama
Wed Feb 22 2023
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Ahmad Maslan said the expected timeline to table the Act has not been determined yet. - BERNAMA
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