Politweet.Org

Observing Malaysian Social Media

Budget 2012 : The Possible Future of Public Debt

The public debt is the total amount owed by the Federal Government, both domestic and external. Since 1997 the Federal Government debt (public debt) has steadily increased. The latest figure for June 2011 places the debt at RM 437 billion.

Not only has the total debt been increasing, but the rate of growth has for the most part remained high. It crossed RM100 billion in 1998. It crossed 200 billion in 2004. It crossed 300 billion in 2008. It crossed 400 billion in 2010.

In other words, the time taken for the debt to grow has been:

100 billion to 200 billion = 6 years
200 billion to 300 billion = 4 years
300 billion to 400 billion = 2 years

That is an exponential growth rate. The average growth rate from 2005 – 2010 was 10.6%/year. If the current growth rate holds steady at 10%, the public debt will cross RM 1 trillion by 2020.

This chart shows the size of the public debt from 1995 – 2020, based on an estimated growth rate of 10% per year from June 2011 onwards. This serves as an illustration of the possible future of the public debt based on recent trends.

While the debt ceiling ensures this will not happen easily, this chart should make it clear that recent trends are not sustainable for the future. Economic reforms are needed to drive up revenue, lower expenditure or both.

Ahmed Kamal
19th October 2011

Update (20th October 2011)
The 1 Trillion figure is too far in the future to be proven valid or invalid, so there is no point in debating that. A 10% growth per year is a simplistic approach, but my intention is to get people to take notice and start asking the government and opposition how their economic policies will affect the debt.

If the public debt increases were largely due to development expenditure (true in most years) then it should ultimately be paid off by the revenue brought in by the development. But we have had larger increases in operating expenditure that have helped contribute to the debt. Our government has a tendency to increase operating expenditure hand-in-hand with revenue increases, if not through planned budget increases then via Supplementary Bills.

The most recent IMF forecast for 2016 estimates government revenue to be 293 billion, and the gross government debt to be 695 billion. This is lower than the 704 billion shown here. Nett debt would be smaller, lowest I can estimate based on IMF’s earlier figures is 670 billion. That is still higher than my 2015 estimate.

——
Data used in this graph:

Format : Year – Amount

Public Debt (RM million)

1995 – 91369
1996 – 89681
1997 – 89920
1998 – 103121
1999 – 112118
2000 – 125626
2001 – 145724
2002 – 164963
2003 – 188767
2004 – 216624
2005 – 228670
2006 – 242225
2007 – 266722
2008 – 306437
2009 – 362386
2010 – 407101
June 2011 – 437182
2012 – 480900.2
2013 – 528990.22
2014 – 581889.242
2015 – 640078.1662
2016 – 704085.9828
2017 – 774494.5811
2018 – 851944.0392
2019 – 937138.4431
2020 – 1030852.287

Advertisements

Written by politweet

October 19, 2011 at 1:22 am

Posted in Analyses

Tagged with , , ,

%d bloggers like this: