Is Malaysia Gonna Bankrupt?

www.kopihangtuah.blogspot.com

BANKRUPTCY is a huge word. Many people claim that our country is going to be bankrupt. Is Malaysia heading towards bankruptcy and unable to settle multiple huge debts?

Well, Malaysia does not have "huge" debts. Malaysia's Debt-to-GDP ratio is now at 50.7%. This is much lower than 92 other countries in the world which includes the likes of Singapore, Germany, USA, UK and pretty much the rest of the developed world. So, 91 countries in the world would have to go bankrupt first before Malaysia.

At 50.7%, it is less than double the 103.4% level in 1986. Our Government debt is not USD900 billion (RM3.6 trillion) as reported by unreliable sources recently. It is RM680 billion or about USD170 billion. If it is indeed RM3.6 trillion, then our Debt-to-GDP level would be close to 300% and would make us highest in the world - much higher than Japan's 220%.

Malaysia's Government debt is 97.5% denominated in Ringgit - a currency we control. This means that unlike Greece which owes and uses Euro that is beyond their control, Malaysia essentially owe ourselves so no one can make us bankrupt. In addition, Malaysia also does not owe a single sen to the World Bank or International Monetary Funds (IMF).

Comparing us with Greece is out of the question. Greece has a debt-to-GDP of 180% right now - more than triple of our 50.7%. The international credit ratings agencies rate Greece at a grade 11 notches lower than Malaysia. Moody's had given Greece a rating of CAA3 compared to Malaysia's rating of A3, which is investment grade. CAA3 is classified as "Rated as poor quality and very high credit risk." while A3 is given as "Rated as upper-medium grade and low credit risk."

Unlike now, at the turn of the millennium, Malaysia had to create Danaharta and Danamodal to bail-out and recapitalise our corporates and banks which were on the verge of failure. Our banks today all make record profits compared to the large losses then. At that time, our stock market plunged 80% to 200 points - unlike now where our stock-market index is at 1796 that is more than double the 800 points 5 years ago.

Back then, large numbers of projects such as the Plaza Rakyat, Bukit Beruntung, KL Linear City and Grand Hilton projects were abandoned - unlike today where no such projects have been abandoned. At that time, our Ringgit had also plunged more than 60% from RM2.30 to as low as RM4.86 to the USD before we had to impose capital controls to peg it at RM3.80.

So, on a balanced analysis, we are far from those dark days. There is still hope. Let 2018 be a prosperous year to us all. After all, 2018 is 2000 plus 18, which carries the meaning "Easiness times 1000 for the Days of Wealth."

* kopihangtuah

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