Tuesday, September 27, 2011

2Q 2011 Government Debt Update

As I covered in the last update, the borrowing binge of the last quarter was largely due to the need to rollover maturing debt from 2008. Although the pace of borrowing has not slackened, redemptions hit RM23.2 billion in 2Q, mostly in April (RM millions):


This is likely to be a continuing feature over the next year or so, as that covers the period between the onset of the commodities bubble of 2008, and the borrowing to cover the shortfall in tax collection during the trough of the recession.

With the net addition to debt fairly marginal in 2Q (actually, the lowest absolute increase since 3Q 2008), total government debt only increased by about RM7 billion (RM millions):


But because the economy kept growing, however so badly, the debt to GDP ratio has peaked for now:


I wouldn’t go so far as to say that that will be the limit – while tax revenue collection has been good this year, next year’s prospects, depending as they do on this year’s performance, might not be so hot.

Along with the slowdown in debt accumulation, estimated debt per capita growth has also slowed:


The current level is about RM15,300 per capita, and RM12,000 after adjusting for inflation (2000 prices):


As I said earlier, I expect the rate of borrowing and redemption to continue at a high level going into next year, something underscored by the government’s cash balance at BNM (RM millions):


That’s an awful lot of money to just be sitting around, so I expect it to be used in short order.

Technical Notes:

Government debt data from the Bank Negara’s July 2011 Monthly Statistical Bulletin.


  1. is this good?Thats a lot of borrowings.But are the debts of 1MDB,Prasarana,MRT Co,KTM included?Lots of invstment there n some of the projects not really viable

  2. At this level, good or bad are value judgments - it depends on your perspective and philosophical outlook. The economic question is whether this level of debt is sustainable, and in that sense the answer is yes.

  3. just got here from fb link, don't know much but will read a bit later, just wanna say thanks first.