Perikatan Nasional(PN)’s Denial That Malaysia Is In The Midst Of A Political And Economic Crisis Risks Further Future Downgrade Of Sovereign Credit Ratings.
Perikatan Nasional(PN)’s denial that Malaysia is in the midst of a political and economic crisis risks further future downgrade of sovereign credit ratings. Fitch Ratings has downgraded Malaysia’s sovereign credit ratings for the first time since the 1997/98 Asian Financial Crisis, and Malaysia is the first major ASEAN country to suffer such a fate in the current COVID-19 pandemic.
Unfortunately the PN Federal government has chosen to be in denial and not address the decline of Malaysia’s key credit metrics that led to the downgrade from A- to BBB+, namely political instability and lack of transparency or governance standards.
The unceremonious removal of the Menteri Besar of Perak by his own PN ally UMNO last week, underscores Fitch’s on the spot assessment of Prime Minister’s Tan Sri Muhyiddin Yassin’s slim two-seat parliamentary majority as the cause of the political instability.
Tan Sri Muhyiddin should boldly address this political instability by allowing a motion of no-confidence in Parliament. His refusal to do so only displays his political weakness and his fears that he has lost his parliamentary majority. Any delay will only perpetuate the current toxic political culture of sacrificing national interests for selfish personal survival.
Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz should stop sugar-coating the numbers but disclose realistic and accurate growth projections of our GDP growth, revenue collections and government debt, which is at variance with Fitch’s analysis. Fitch expects general government debt to jump to 76% of GDP in 2020 from 65.2% of GDP in 2019, and direct government debt at RM874.27 billion or 60.7% of GDP as at end-September, which is above the statutory ceiling of 60% of GDP.
More importantly, Fitch views that deterioration in governance and continued political uncertainty could dampen investor sentiment, constraining economic growth.
Clearly this negative perception is not helped by the political cannibalization of government resources with open tenders taking a back seat to negotiated tenders, and replacing professional board of directors of Government-linked Corporations(GLCs) with political appointments, such as the offer of the post of Petronas Chairman to Gua Musang MP Tengku Razaleigh to buy political support.
Of greater concern is the apparent failure of Tan Sri Muhyiddin to contain the COVID-19 pandemic with the decision to allow domestic travel and ease Covid-19 restrictions in several states despite the spike in COVID-19 infections to record levels.
UMNO leaders have hit out at the Prime Minister’s failure stating that Malaysia’s Covid-19 crisis was in a worse state than in Indonesia, reportedly 2,234 cases per million population in Malaysia compared to 2,096 cases per million in Indonesia. The total number of Covid-19 cases (72,694) was expected to exceed China’s total of 86,619 in the next 10 days.
The PN Federal government should work with all political parties and all Malaysians to resolve this political and economic crisis to achieve an upgrade and regain our A- sovereign credit rating.
This sovereign credit rating downgrade is an urgent wake-up call for the PN government to carry out urgent political and economic structural reforms. Unless PN seeks to unite and work together to provide certainty, clarity and consistency to our political and economic policies, Malaysia’s prospects will not be bright and the outlook foresees risks of future downgrades.
Lim Guan Eng
DAP Secretary-General
MP for Bagan
