Global Debt Limits Raised To Support The Economy | Money


Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz in Parliament, Kuala Lumpur, September 14, 2021. – Bernama pic

KUALA LUMPUR, September 20 – Growing concerns over many variants of Covid-19 have intensified the need for government intervention to support the economy as well as protect households and vulnerable groups by adjusting expansionary fiscal policy and increasing their short-term debt limits.

Last year, Malaysia raised the legal debt limit to 60 percent, from 55 percent of gross domestic product (GDP), and plans are underway to increase it to 65 percent to provide the government the leeway necessary for financing needs.

Countries like the United States, China, the United Kingdom and South Africa have also followed the same path.

“The debt to gross domestic product (GDP) ratio of less than 75-80% is considered manageable, so there is nothing to worry about as it (Malaysia’s debt to GDP) is in line with stakeholders’ expectations market, ”Juwai said. IQI Chief Economist Shan Saeed in Bernama.

According to the International Monetary Fund’s World Economic Outlook database, Japan, with a population of 127.18 million, has the highest national debt in the world at 257 percent of its GDP.

China’s national debt currently represents 54.44 percent of its GDP, a significant increase from 2014 (41.54 percent).

In a recent statement, the Institute of International Finance (IIF) said global debt – which includes government, household and corporate bank debt – has jumped from $ 4.8 trillion to $ 296 billion. at the end of June 2021.

He noted that the rise in debt levels was the largest among emerging markets.

Shan said that an expansionary fiscal policy would give the government more leeway to come up with stimulus measures, especially for small and medium-sized businesses and vulnerable groups.

Since last year, the government has rolled out seven stimulus packages worth a total of RM380 billion.

University of Malaysia Senior Professor Dr Goh Lim Thye said increasing the legal debt limit is acceptable as long as it is spent wisely and generates positive returns through multiplier effects.

“However, the downside is that the government has to serve the additional financial interest with the borrowed funds. The question is, what is the investment or spending plan for the additional funds? Can the country generate positive returns?

“If policymakers plan to use the additional funds to generate additional income and new employment opportunities for the country, then this decision should be welcome. Otherwise, policymakers would have to go back to the drawing board to find a new strategy and a new solution, ”he said.

Recently, the Minister of Finance, Tengku Datuk Seri Zafrul Aziz, said that the necessary budget support would be provided to preserve the well-being of people and businesses and strengthen the health system, while minimizing the scars on the economy in the wider.

He said that once the crisis subsides, the government will resume fiscal consolidation, guided by the medium-term fiscal framework and supported by the gradual implementation of the medium-term income strategy which aims to improve the income base. from the country.

“This will balance short-term fiscal requirements with long-term fiscal and economic sustainability,” he added. – Bernama

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