Unlike many developing countries, Malaysia had until the last 15 years, avoided deficit funding and the accumulation of high levels of external and internal debt that culminated in debt crises of the type that afflicted Argentina, Mexico and many countries in Sub-Saharan Africa.
The Federal Government followed prudent policies and followed fiscal policies that were viewed favorably. Both Foreign Direct Investment flows and the domestic private sector contributed to growth.
Thus, through the early 1970s and the decade of the 1980s small deficits were recorded, indeed in the early 1990s small surpluses were recorded. The size of the public debt was largely stable and did not exceed RM 100 billion.
However, the 1997 East Asia crisis, triggered by contagion effects of the crisis in Thailand, led to a radical change in fiscal policy. The Federal Government embarked on a pump priming effort to revive the economy.
Many large scale projects were mounted; many heavily indebted crony corporations were bailed out. The public sector surplus of RM 6.6 billion recorded in 1997 evaporated and became a deficit of RM 5 billion in 1998.
Since 1998, despite the recovery, the Barisan Nasional (BN) Government has continued to run deficits ever increasing deficits which peaked under the Prime Ministership of Datuk Seri Najib to RM 47 billion. Continue reading “26-Day Countdown to 13GE – Federal Government Deficits and Debts”
