Saturday, 29 September 2012


with thanks to Azam 64A

List of countries by public debt to GDP

North Korea 0.4%
Hong Kong 10.1%
Uganda 25.0%
Philippines 49.4%
Malaysia 53.5% (2011)
Brazil 54.4%
Poland 56.3%
Netherlands 65.9%
Germany 82.0%
US 104.1%
Singapore 118.2%
Greece 165.3%
Japan 208.2%

Is ours too high or too low?

Good question to ask. 

Public Debt to GDP ratio, N Korea 0.4%, Malaysia 53.5%, so is N Korea managing its economy better than Malaysia?

No. The ratio only gives the amount of debt compared to the income of a nation. Countries need to borrow to stimulate growth as compared to only the income generated by the country. If the debt is put to good purposes like development of health, education,agriculture, other industries - ok, especially if done well, properly planned and managed, no wastage. If the debt is wasted like leakages through corruption, spending on unproductive projects like the world's tallest and longest building, buying weapons at high prices that don't function as expected - then not ok.

Is 53.5% a safe ratio for Malaysia?

To know the this, the rate of interest for the debt, the annual growth of GDP comes into the picture. If the
interest is low, and the rate of growth high, a nation can take more debt. That is why S'pore can easily absorb
a ratio of 118.2%. Malaysia can manage 53.5% but almost reaching the safe limit. Lebih pada ni akan lemas.

Using the debt interest rate and rate of growth of GDP the article came out with a formula to determine
if a nation's public debt is sustainable. At the moment Malaysia's debt is just sustainable. If the debt
is increase further Malaysia's income will not keep pace with the debt payment. The amount of debt
will increase even without taking any more loan.

The interest rate charge on a nation when it borrows depend on its rating - set by international agencies
like Std.&Poor, Fitch. They base this on the economic performance, stability, transparency of a nation.
The highest rating is AAA , S'pore is rated this, Malaysia is A-. The fear for Malaysia is not the A- rating
as such but the fast increase of national debts in the last few years. Can Malaysia improve its rating to A
in the near future? This is still several steps behind S'pore's AAA, which can borrow more cheaply and manage
the borrowings well, no wastage. The capital will further increase the rate of growth of GDP, which will allow 
it to borrow more. It is in a
 virtuous cycle. Malaysia increase its borrowing at a fast rate but the efficiency
in the country is sliding, it wastes its borrowings, joli sana joli sini. Sekarang nak bagi 1.5 month bonus to
every civil sector employee. What is the % of them that can be classify as good so as to justify this bonus?
Nak bagi RM500 pulak, yg pertama dah jadi tahit. So Malaysia is entering into a 
vicious cycle. 
It looks from the above that I am only blaming the govt, what about individuals like you and me? Yes, we are 
also to be blame if we do not perform to std. If we are efficient we can to an extent overcome the failings of
our great leaders. Also don't forget, vote smart!

azam 64A