He says a country's debts must be related to potential cash flow, but the government must keep track of debt levels.
Universiti Tun Abdul Razak’s Barjoyai Bardai says the reality is that Malaysia is a dynamic country with a robust economy, rich in natural resources and commodities. (Facebook pic)
PETALING JAYA: An economist says Malaysians don’t have to panic over the country’s RM1 trillion debt, though the government has to be careful in managing its expenses and debts.
Speaking to FMT, Universiti Tun Abdul Razak’s Barjoyai Bardai said debts must always be related to potential cash flow.
“If you just look at debts over the past 30 years, we are headed down the path of Greece, but the reality is that we are a dynamic country with a robust economy, rich in natural resources and commodities.
“If a country was a company, essentially, we’re talking about that company’s ability to service and pay its debts. We’re doing quite okay because of the established structure of the economy.”
He was commenting on Prime Minister Dr Mahathir Mohamad’s statement earlier today that the country’s debt had reached an alarming RM1 trillion and that important measures were needed so that Malaysia could recover quickly.
Barjoyai said that even if the worse were to happen, a recession, the country would still survive.
Still, he said it was important for the government to keep track of its debts so that it didn’t grow at a faster rate than the country’s revenue.
“We don’t have to panic but we should be wary over the RM1 trillion debt, and the government must make sure we have the capacity to service this debt as it will determine the credit rating and ensure we don’t go bankrupt.”
He added that a recession occurs once every 10 years on average and that one was due any time now, but the government shouldn’t try to avoid it.
“Recessions happen naturally. If we try to avoid it, like we have in the past by pumping money into mega projects, we can only defer the recession, but it will hit us heavily later on.
“It’s just a short-term reprieve,” he said, noting that this had been done in 1994 and 2009.
“What is important is ensuring we have high reserves and liquidity, and that belt-tightening measures are adopted by the government to make sure the country isn’t spending more than its ability to generate income.”
Barjoyai said it was crucial that the government now look at financial planning 10 and 20 years ahead, as it used to in the past, to better prepare the country and people for the future.
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