MALAYSIA: A New Dawn 2018 was the title of the star-studded gathering of corporate Malaysia, bankers, fund managers and analysts who came from near and far and filled-up the conference rooms to the brim, especially when our Prime Minister and the Minister of Finance took stage in the first two sessions of the day.
The message was clear, it was telling the investing world what has transpired since May 9 and how the government is managing the various challenges it faces since taking over from the previous ruling party.
From the lack of commitment among civil servants to carry out Pakatan Harapan’s promises to financial details as well as putting the house in order in various sectors. It was a good one-day show organised by the Finance Ministry in collaboration with CIMB, Maybank and RHB.
Since GE14 and after the new government was sworn in, we now know that the nation’s debt level is clearly more than what was initially communicated to the market. This I would refer to as our balance sheet issue. Our other issue is our budget deficit level and clearly, although we would likely be able to meet this year’s target of -2-8%, it will likely be a herculean task to achieve the same in 2019, given the RM35bil shortfall due to the GST and income tax refunds. This is our income statement issue.
To tackle the balance sheet issue, the government’s plan is to monetise the assets that is has and this includes either landbank, stakes in listed or unlisted companies held directly or via Khazanah Nasional or other GLCs. Whether the listing of our most prized asset, Petronas, is on the cards is left to be seen.
Nevertheless, the objective is to bring back our current debt/GDP from the current level by at least 10-11 percentage points, i.e. to the previously self-imposed ceiling of 55%. Given the three-year time frame needed, this entails a reduction of at least RM180bil, i.e. assuming our nominal GDP expands by about 5% p.a. to about RM1,645bil by 2021 while our net government debt rises by about RM40bil p.a. to sustain our budget deficit and potentially to raise another RM35bil one-off in 2019 to return to taxpayers the GST and tax refunds due. Question is, while the government do have assets it could monetise to raise this RM180bil, what will the government sell to raise the funds required?