PETALING JAYA: Former premier Najib Razak, in an exchange with Subang MP Wong Chen, said today that expanded government aid to the people could result in a ballooning of the debt ratio to 65% of gross domestic product (GDP).
He said that more government borrowing, to give blanket aid, would do more harm than good.
Instead, “those who are in need (and they know who they are)” should be allowed to withdraw their own money from their EPF retirement savings, Najib said in his latest response to Wong Chen about the merits of the withdrawal facility from EPF Account 1.
The government has allowed EPF members to withdraw up to RM10,000 each next year as part of Covid-19 relief measures. About eight million members would be eligible.
Wong Chen has argued against the withdrawal facility as being “overkill” and causing a potential RM70 billion toll on the EPF. He said the government should help the people instead of asking them to use their own money.
However, Najib said the total amount was not likely to reach RM70 billion. He said there were no statistics on the number of people who needed help because of reduced or lost incomes. “That is why the rules should be extended to as many as possible so that no one in great need is left behind,” he said.
He agreed with Wong Chen that the government had a responsibility to help, and had done so. However, there were limits on what help could be provided and how to target those who needed help.
He said the national debt had been brought down to 48.7% in early 2018 after eight consecutive years of reducing budget deficits.
However, Pakatan Harapan (PH), who took power in May 2018, had removed GST, provided a 3-month tax holiday, taken as much as RM84 billion from Petronas (RM54 billion in 2019 alone) and run successive years of higher budget deficits.
The PH government added some RM140 billion in new debt since coming into power, just shy of the 55% statutory limit that restricts the government. With the weaker economy and the Covid-19 crisis in hand, the Perikatan Nasional government had increased the debt limit to 60%.
“But this 60% statutory limit has also been breached based on 2020 third-quarter financial reports,” Najib said.
For the government to provide more help to the people, further borrowings might be needed, and an increase in the debt limit to 65% of GDP. “A 5% increase is just RM75 billion of our GDP size of around RM1.5 trillion,” he said.
He speculated that the government might have been able to provide RM10,000 or even RM20,000 to each household in the lower-income and middle-income groups “if PH had not abolished GST and increased borrowings, and had not taken RM84 billion from Petronas”.