This article first appeared in The Edge Financial Daily on May 23, 2018

PUTRAJAYA: Finance Minister Lim Guan Eng, who clocked in at the ministry of finance (MoF) on his first working day yesterday, confirmed that the newly unbarred public accounts — the bulk of which are linked to beleaguered state-owned 1Malaysia Development Bhd (1MDB) — revealed that the country’s national debt has breached RM1 trillion.

“This is revealed with all relevant departments now able to start consolidating their numbers and accounts. Previously, certain accounts were not accessible.

“It is clear that the previous government had conducted an exercise of deception against the public over certain hot-button items, especially 1MDB, and even misrepresented the financial situation to Parliament,” Guan Eng told the media yesterday.

According to him, some of the reports and accounts were marked as “red files”, effectively preventing access by certain government officials. “I think we know [this was done under] whose instructions,” he added.

A thorough investigation to uncover the essential financial data is still ongoing, said Guan Eng.

Meanwhile, Guan Eng said Malaysia will experience short-term pain as Pakatan Harapan works towards “cleaning up the federal government finances”.

“What is important is that Malaysia’s current account remains in surplus, and to clean up the mess left behind [by the previous government].

“There is some pain that we will go through on a temporary basis, but I think the investing public know that once that is done, [the economy] can only grow stronger,” said Guan Eng.

He also echoed the sentiment shared by Council of Eminent Persons chairman Tun Daim Zainuddin on Malaysia’s sovereign credit rating. “In terms of sovereign rating, I agree that there is nothing to be concerned about at this juncture. For us, [what’s more important now is] to clean up the mess — I think it is good for Malaysia in the long term,” Guan Eng said.

Daim was reported as saying last Friday that he was not really concerned about anything credit rating agencies would say, and cited the sub-prime mortgage crisis that occurred in the US in 2007, despite the high credit rating it was given, as an example.

“Don’t worry about them. In fact, you should not even worry about the discussions that the think tanks are having here,” Daim was quoted as saying.

The Pakatan coalition, which wrested power from Barisan Nasional on promises of reforms, has pledged to abolish highway tolls, restructure tax schemes and reintroduce the fuel subsidy — all of which would eat into the nation’s coffers, according to analysts and credit rating agencies.

Guan Eng said the new government “is looking at several options” to offset the impact the promised changes will create, but added that discussions are still ongoing. Nevertheless, he insisted that Malaysia’s economic fundamentals “are still strong”.

“Malaysia’s financial and banking system remains robust and well capitalised. In addition, non-performing loans constitute less than 1% of the total loan portfolio,” he said, adding that the nation’s fiscal position will remain healthy as long as the related agencies provide an accurate view of Malaysia’s “actual financial position”.

Guan Eng also reiterated that the sales and services tax (SST) can be reintroduced within the year. “According to Pakatan Harapan’s manifesto, the SST rate will be at 10%,” he added, saying the official rate will be confirmed when the tax scheme takes effect.