This article first appeared in The Edge Financial Daily on June 14, 2018

KUALA LUMPUR: Former prime minister Datuk Seri Najib Razak said the Pakatan Harapan government’s claim that the federal debt was more than RM1 trillion has been disproved after Moody’s Investors Service maintained that Malaysia’s debt ratio was at 50.8%.

In a Facebook  post yesterday, Najib said the credit rating agency had independently assessed the government’s debt claim as well as Putrajaya’s “self-declared” debt-to-gross domestic product ratio of 80.3%. “Moody’s have found those claims to be untrue, and have maintained our debt ratio to be the 50.8% declared by the Barisan Nasional government previously,” he said. “You can mislead the people but you cannot mislead the experts.”

The  new  government, he said, must  adhere to international standards and keep politics out when it comes to financial reporting.

Najib said even if the government’s 80.3% debt ratio was accepted, it was still lower than the 103.4% reached in the mid-1980s during Tun Dr Mahathir Mohamad’s first tenure as prime minister. “Malaysia did not go bankrupt then, so there is no logic that Malaysia will be bankrupt at 50.8% or even at 80.3% — especially since 97% of our government debt is denominated in ringgit,” he said.

Najib’s claim was, however, rejected by Finance Minister Lim Guan Eng, who reiterated that the debt level stood at RM1.087 trillion.

“The federal debt is at that level because we want to include those contingent liabilities and government guarantees which have now become direct debt,” Guan Eng told reporters at a Ramadan dinner organised by Country Heights Holdings Bhd.

He said the Pakatan administration has never denied that direct government debt stood at RM687 billion. But he stressed the importance of taking into account government guarantees which have or will become direct government debt, citing the example of loan guarantees of  1MDB as a form of government liability. “Why don’t you call a spade a spade? Why do you want to hide behind the definition? You are not only deceiving the people, but you are also deceiving us, by pretending our debt level is not so high,” he said.