Malaysia National Debt Update

Malaysian federal government expenditure and revenue have finally been updated for 4Q 2008. First the raw data:



There’s a clear seasonal structure to government fiscal operations, revolving around income tax collection that typically comes in from 3Q onwards. On an annual basis:



Government revenue has always been sufficient to cover ongoing operational expenses. The monkey wrench in the works (at least from a balanced budget perspective), is development expenditure a.k.a. subsidies and investment. That said the fiscal balance as a ratio to nominal GDP is still below the level where rating agencies and investors start getting worried:



On the other hand, we’re most likely going to breach that level this year and next. The effective income tax rate doesn’t look too bad (direct taxation as a ratio to nominal GDP):



And taking away from petroleum income taxes, it looks even better (direct taxation less petroleum income tax as a ratio to nominal GDP):



The debt to nominal GDP ratio has continued to fall:



But again, this is set to rise this year and next. In terms of magnitude, last year saw a net addition of RM39.7b in national debt, which dwarfs the last record of RM27.9b in 2004. The total stands at over RM306.4b, which handily beat my assumption of RM280b in my last national debt post. It also means that my back of the envelope calculation of RM365b by the end of 2010 will essentially be reached that much more quickly, and we will likely be well over RM400b instead by the end of 2010. Sobering numbers.