By Tony Pua

Finance Ministry Secretary-General’s arrogant and condescending remarks of Fitch Rating’s outlook revision of the country exposes the lack of intent to tackle serious structural problems facing our country’s economy

Finance Ministry Secretary-General Tan Sri Dr Mohd Irwan Siregar Abdullah has blamed the Fitch Ratings revision of Malaysia’s economic outlook to ‘negative’ by saying that the ratings agency was run by young analysts.  He had even jokingly said he regarded the case of Fitch Ratings as “ratings analysts from Hell”.

The sheer contempt and arrogance in the comments made by the Finance Ministry Secretary-General exposes the fact that the Government doesn’t treat the negative outlook revision by Fitch Ratings last month as important.

These comments are consistent with the position of Dato’ Seri Najib Razak, who is both the Finance and Prime Minister, who tried to make light of the negative revision by pointing out that Fitch still “affirmed our rating”. He said negative element “is just the revision of our outlook but that depends on the move the government would make”.

The absolute lack of gravity of the response by the Finance Ministry does not give Malaysians and investors any comfort that real concrete actions will be undertaken.

It should be emphasized that this isn’t the first “warning” by Fitch Ratings.  In August 2012, Fitch has already warned that Malaysia’s “fiscal trends may eventually lead to some form of negative rating action”. This means that the negative rating did not come without warning, and but as a result of complete inaction by the Government over the past year.

Of biggest concern to Fitch then was “the increasing reliance on off-balance sheet funding could potentially call into question the meaningfulness of the 55% of GDP federal debt ceiling.”  The “off-balance-sheet funding” refers to Malaysia’s penchance to provide of guarantees to government-linked borrowers which does not officially count as Federal Government debt.  In reality, if both official government debt and government guaranteed debt are put together, our debt to GDP ratio will be a much higher and worrying 68.9%, as opposed to the official 53.7%.

Tan Sri Mohd Irwan even went on to praise S&P (Standard and Poor’s) and Moody’s, who were apparently “willing to listen” to the Government, and hence are the “senior fellows”.  Even with these 2 reports, the Secretary-General appears to fail to read between the lines which were consistent with Fitch’s statement.

The S&P in its July report, while maintaining the country’s outlook said “we may lower the ratings if the government fails to deliver reform measures to reduce its fiscal deficits and increase the country’s growth prospects.”  Similarly, in the Moody’s generally positive statement this month stated that “the [Malaysian] authorities have the institutional capabilities for advancing reforms, however, political willingness has been lacking”.

The Government’s penchance for listening only to the statements of praise, and contempt for those which criticise will only lead to our economic downfall.

We would like to remind the Finance Ministry of a Benjamin Franklin quote, “Geese are but Geese tho’ we may think ’em Swans; and Truth will be Truth tho’ it sometimes prove mortifying and distasteful”, or to quote Bill Clinton, “Our critics are our friends, they show us our faults”.

If the Finance Ministry really believes that the Fitch warning “is a concern that we share as a government and [the Government] would seek to address those concerns”, then the most important measure that he must agree to is to recognise all off-balance sheet loans and contingent liabilities as Federal Government debt in the upcoming Budget.

Only then Malaysians can see the true picture if the Najib administration has the political will to cut down our real budget deficit, instead of just providing a feel-good statistic that does not incorporate hidden debts.  If Dato’ Seri Najib does not reform the budgetary process as well as cut wasteful expenditure which are hidden with off-balance sheet loans, then we fear the ultimate consequence of not just a “negative outlook” but an actual downgrade of our sovereign ratings by all three international rating agencies.