The Malaysian National Debt or How Much Is Everybody On The Hook For

Since the mini-budget is going to be tabled in the Malaysian Parliament today, I thought I'd put up a historical view of Malaysian government debt up to 2008. The following is gross government debt from 1970 to 3Q2008, which is the latest data point (RM Millions):



Note the faster rate of increase since 1997; not surprising given the deficits run up during that period until now. Next is the level of government debt adjusted for inflation in 2000 prices (CPI:2000=100):



And on a per-capita basis:



Translating back to current prices, that's approximately RM10,389 for every man, woman and child, and at least 2.5 times that amount for every potential taxpayer. Luckily, external government debt is less than 10% of the total, so there's little foreign exchange risk.

To counterbalance this frightening looking increase in debt, here's gross government debt scaled to nominal GDP:



This is easier to stomach: as of 3Q2008, the debt to GDP ratio has fallen below 40%.

A word of caution here: while the numbers look a little daunting at an individual level, national debt should ideally be viewed against national assets (both balance sheet items), of which there really isn't a good measure. The debt to GDP ratio is essentially comparing a stock variable (debt) against a flow variable (national income), and is more a measure of repayment capability rather than solvency. There is a lot of idiotic misuse of GDP numbers in that respect, such as statements that Bill Gates or Microsoft are worth more (net worth: stock again!) than many countries GDP (income!). Be warned.

I haven't time to look at how the numbers above compare with our peers, or any of the advanced economies, but I'll update this post when and if I do.

Technical Notes:
1. Government debt and GDP data is from BNM's MSB; CPI and population data is from DOS
2. The CPI series, due to changes in weights is a spliced index with a base year of 2000