Do not make light of Fitch’s outlook, Pua tells Najib

KUALA LUMPUR, Aug 2 — Prime Minister Datuk Seri Najib Razak’s response towards ratings agency Fitch Ratings’ downgrade of Malaysia’s finance outlook lacks gravity, the DAP’s Tony Pua said today as he questioned Putrajaya’s sincerity in fixing the nation’s financial woes.

On July 30, Fitch revised Malaysia’s sovereign debt outlook from “Stable” to “Negative”, but Najib downplayed the issue yesterday, describing it as a temporary setback that would be addressed in the 2014 Budget.

“Najib’s immediate response to Fitch Ratings’ revision of Malaysia’s outlook to negative does not give confidence that the government views the matter seriously,” Pua (picture), the DAP MP for Petaling Jaya Utara, said in a statement.

“The lack of gravity of the response does not give Malaysians and investors any comfort that real concrete actions will be undertaken.”

Najib yesterday made light of the outlook by saying that Fitch still affirmed Malaysia’s rating, but Pua warned that lack of action will not just result in a downgrade of the outlook but also the sovereign rating itself.

The DAP national publicity secretary also highlighted that Fitch’s “warning” had not been the first but the most serious so far, as it has already warned of Putrajaya’s fiscal trend back in August last year.

Pua stressed that if the Najib administration was really serious about the problem, it must first and foremost agree to recognised all off-balance sheet loans and contingent liabilities as government debt in Budget 2014.

Yesterday, Pua had fingered the Najib administration for Fitch’s negative reading, saying it was due to Putrajaya’s penchant for hiding debts especially in the form of government-guaranteed debt.

Fitch’s report noted that the federal government debt rose to 53.3 per cent of gross domestic product (GDP) at the end of 2012, up from 51.6 per cent at the same period the year before.

The general government budget deficit had also increased from 3.8 per cent of GDP in 2011 to 4.7 per cent in 2012, coming from a 19 per cent rise in public wages expenditure in a pre-election year.

Putrajaya has always maintained that federal government debt is well below its targeted ceiling of 55 per cent of GDP, but Pua stressed that the figure does not include government-guaranteed debt which is hidden.

In December 2012, Fitch had warned Putrajaya that its reliance on off-balance sheet funding could make the 55 per cent ceiling meaningless.

Fitch also highlighted recently that government-guaranteed debt has jumped from nine per cent of GDP at end-2008 to 15.2 per cent by end-2012.

“In reality, if both official government debt and government-guaranteed debt are put together, our debt to GDP ratio will be a much higher and worrying 68.9 per cent,” Pua explained.

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