Friday, May 15, 2015

Malaysia has no more tools left to tackle financial crisis, says economist

BY RAM ANAND

Datuk Dr Mohamed Ariff, an economist at the International Centre for Education in Islamic Finance, says because of political expediency, Malaysia deferred balancing the federal budget. – The Malaysian Insider pic by Seth Akmal, May 15, 2015.
Datuk Dr Mohamed Ariff, an economist at the International Centre for Education in Islamic Finance, says because of political expediency, Malaysia deferred balancing the federal budget. – The Malaysian Insider pic by Seth Akmal, May 15, 2015.
Malaysia does not have the option of using a fiscal instrument to face any future financial crisis, mainly due to its high debt and continuous budget deficit, an economics professor said.
Datuk Dr Mohamed Ariff, from the International Centre for Education in Islamic Finance (ICEIF), said that Malaysia has "no ammunition" in the fiscal front if the country was hit by a crisis.
This is due to the continuous budget deficit for the past 17 years, which has resulted in federal debt lingering close to the self-imposed ceiling of 55%.
At the end of 2014, total federal debt both domestic and offshore amounted to RM582.8 billion or 54.5% of gross domestic product (GDP), according to a statement by the Finance Ministry in March.
It also said that Putrajaya remained committed to ensuring that the federal government debt levels did not exceed 55% of GDP.
"Some will argue that if we included contingent liabilities, our debt would have passed that ceiling by now," Ariff said during the launch of the United Nations Economic and Social Commission for Asia-Pacific (UNESCAP) survey on the region in Kuala Lumpur yesterday.
"We have very little room to manoeuvre in our fiscal instrument.”
Ariff also said that Malaysia would have been on a different "trajectory" altogether if it had kept to its reform agenda after the 1998 and 2008 financial crises.
"If Malaysia had kept to its reform agenda, post-crisis, we would have been in a different trajectory.
"But due to certain political expediency, that was put into the backburner," he added.
Ariff did not elaborate at the forum on what post-crisis reforms would have entailed.
Prime Minister Datuk Seri Najib Razak said Malaysia aimed to achieve a balanced budget by 2020.
Ariff said Malaysia was supposed to have a balanced budget by 2005, and that was then pushed to 2007.
"But after the financial crisis, that was put off until 2020." – May 15, 2015.
- See more at: http://www.themalaysianinsider.com/malaysia/article/malaysia-has-no-more-tools-left-to-tackle-financial-crisis-says-economist#sthash.Y5Y79DmI.dpuf

No comments: