KUALA LUMPUR, Sept 19 — Finance Minister Lim Guan Eng said today the government will continue to issue sovereign bonds as part of its strategy for growth, giving his assurance that the additional securities will be manageable amid Putrajaya’s effort to cut its borrowings.
“The government has repeatedly expressed that we will be very prudent in handling debt and liabilities, which is already high at over than RM1 trillion,” Lim said in a statement.
“It must be said, however, that the benefits of sovereign debt issuance are plenty. This method is the simplest, most reliable, and easiest to manage due to the size of our institutional investors.”
The Pakatan Harapan (PH) government drove tough large-scale cutbacks on public spending immediately after taking office as part of efforts to shrink state debt, which Lim claimed had reached over RM1 trillion ringgit.
PH leaders have said the new administration’s priority will be to bring the debt level down, and that development will be contingent upon its finances. It has already axed or in the midst of negotiating new terms for several key infrastructure projects.
Lim said additional debt issuance was among the short term options available to finance some of the projects, although cost-saving remain a priority.
“First, the priority is towards finding the lowest financing cost. Second, the timing and size of fundraising will be guided by the ability of the financial markets to absorb it in an orderly manner and avoid unintended consequences,” he said.
“Third, any form of strategy adopted will be focused on maintaining the overall confidence in fiscal sustainability and economic resiliency.”
Any additional issuance of debt will be gradual and transparent to the market via announcements through the auction calendar, which is current practice.
The measure is expected to mitigate borrowing cost for the government and allow investors to absorb them without major adjustments in yields, the Bagan MP said.
PH will also look at monetising non-critical and non-strategic assets through sale of shares, land, and leasing of idle government assets and buildings.
“We will ensure that this will be deployed in compliance with the highest standard of governance and transparency without disruption to the business community and the people,” Lim said.
PH is set to announce a roadmap for sustainable growth and fiscal discipline, the minister said, even as it grapples with “legacy issues of corruption” inherited from the Barisan Nasional regime.
Investors have received PH’s fiscal policies well, he added. Lim said Malaysia remains an attractive investment option with potential for high returns if the newly-elected government is able to tackle its fiscal challenges for the next three years.
“If Malaysia can successfully navigate the fiscal challenges over the next three years, those who invest now can expect a substantial profit or returns to investment later,” he said.