Did the IMF warn Malaysia about having the second most national debt in Asia, after Sri Lanka?!
Take a look at the viral claim, and find out what the facts really are!
Claim : Malaysia Has 2nd Most Debt In Asia, After Sri Lanka!
This post about IMF warning Malaysia about having the second most national debt in Asia, after Sri Lanka, has gone viral.
People are sharing it as a warning of how Malaysia could very soon descent into the economic chaos and misery affecting Sri Lanka.
Truth : Malaysia Does Not Have 2nd Most Debt In Asia, After Sri Lanka!
This is yet another example of FAKE NEWS circulating on social media, and here are the reasons why…
Fact #1 : IMF Did Not Say Malaysia Is In Economic Trouble
The International Monetary Fund (IMF) did not warn that Malaysia is in huge economic trouble.
In April 2022, it warned that Asian nations, like the rest of the world, are at risk of stagflation from being battered by the war in Ukraine and the slowdown in China from COVID-19.
Fact #2 : Malaysia Does Not Have Second Most Debt In Asia
The claim that Malaysia has the second highest national debt in Asia is also false.
On both the GDP percentage and per capita basis, Singapore has the second highest national debt in Asia, behind Japan. Even Sri Lanka has less debt, per capita or as a percentage of its GDP, than Singapore or Japan.
Malaysia has far less national debt than Sri Lanka as a percentage of its GDP, but twice the debt on a per capita basis.
Here is a comparison I created of countries with the highest national debt in Asia :
(% of GDP)
|Debt Per Capita|
|Sri Lanka||2020||$81.7 billion||101.2%||$3,726|
Fact #3 : IMF Optimistic Malaysia Will Expand By 5.75% In 2022
In May 2022, the International Monetary Fund (IMF) actually announced that it is optimistic that Malaysia’s economy will expand by 5.75% in 2022, driven by pent-up domestic demand and continued strong external demand.
It also said that Malaysia’s high vaccination rates, and limited movement restrictions are supporting economic expansion.
Fact #4 : High Debt Is Not Necessarily Bad
While a high national debt is not ideal, it is not necessarily a bad thing either. It really depends on how much interest needs to be paid on the debt, and what the government is using it for.
Unlike individuals who will die eventually, the government of a country can last for hundreds of years. So governments do not have to pay back all of their debts within a certain amount of time.
As long as the government can keep paying interest on its debt, it can continue to borrow money to service deficits in its budget, or to invest in projects that grow the economy.
Fact #5 : How Governments Use Money Matters More
Just like how you can use borrowed money to invest in assets or splurge on liabilities, how the government uses the borrowed money matters more than how much it borrows.
If the government uses borrowed money to invest, that will spur growth that allows it to easily repay its debts while driving down the interest it pays.
But if the borrowed money is lost through corruption or wasteful projects, the government will find it harder to pay interest on the debt and may even default on payments.
Fact #6 : High Government Spending During Pandemic Is Expected
Practically every government in the world was forced to spend significantly more during the pandemic. Most run into large deficits during the pandemic because :
- lockdowns reduce economic activity, reducing taxes
- governments need to spend more on healthcare to combat COVID-19
- governments cut taxes to support citizens and businesses
- governments provide monetary support for citizens and businesses
This isn’t unique to Malaysia, but applies across the world. That’s why Malaysia’s national debt jumped significantly after January 2020.
Fact #7 : Malaysia National Debt Only Increased By 4.5% In 2021
Malaysia’s national debt increased from $228.7 billion in 2020, to $239 billion (RM 979.8 billion) in 2021 – an increase of about 4.5% year-on-year.
While this increase pushes Malaysia close to a national debt of 65% of its GDP, it is still much lower than many other countries.
More importantly, Bank Negara Malaysia reported international reserves of $116.9 billion as of 31 December 2021, which is enough to finance 7.7 months of retained imports, and is 20% higher than the total short-term external debt.
In other words, Malaysia is not anywhere close to collapsing economically, like what happened in Sri Lanka.
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