Malaysia not at risk of collapsing like Sri Lanka, finance minister says

MALAYSIA is stable and is not at risk of going bankrupt like Sri Lanka, Finance Minister Zafrul Aziz said, citing the International Monetary Fund's (IMF) prediction for the economy to expand 5.75 per cent this year as reason for confidence.

"The IMF has never said that Malaysia is facing economic troubles that could bankrupt the country," he said in Parliament on Tuesday (Jul 19). "If we compare our economic indicators with Sri Lanka, it is clear our economy is far more stable than theirs."

Still, the government must continue to manage the country's finances prudently and control the level of debt, he said.

A Bloomberg gauge of 1-year default probability showed Malaysia at 2.43 per cent compared to Sri Lanka's 19.4 per cent, with a reading above 1.5 per cent signifying high risk of failure to pay. The South-east Asian nation, whose budget is strained by inflation-relief efforts is expected to fork out a record RM77.3 billion (S$24.2 billion) in total subsidies this year, with concessions on fuels and cooking gas alone projected to touch 37.3 billion ringgit, Zafrul said last month.

The jump in palm oil and crude oil prices this year is expected to generate tax revenue of 10 billion ringgit for the country, Zafrul said Tuesday, adding that the government will also garner an additional 10 billion ringgit from income and indirect taxes as the economic growth is expected to be stronger in the second quarter of this year.

Even so, higher revenues would be insufficient to cover the surge in government subsidies, he said. BLOOMBERG