By Jamari Mohtar

The gauntlet thrown by former prime minister Najib Razak to Finance Minister Zafrul Abdul Aziz with his spurious claims on government loans and debts was answered like a true fighter for the truth by the latter.

In his Facebook post on May 22, Najib claimed the government has incurred loans amounting to RM115.53bn as of May 22 and gave a list of the monthly breakdown of the loans from January to May 22, and was ready to be investigated under the fake news Emergency Ordinance if the list is proven false.

He went on to say it is the right of the government to borrow RM115.53bn since the beginning of this year and spend it according to its whims and fancies after the Finance Act that controls and monitors government expenditures has been suspended through an Emergency Ordinance.

Najib seems to have an axe to grind against Prime Minister Muhyiddin Yassin when he even takes a dig at Muhyiddin when he continued his rambling by suggesting that most of the loans could have been spent on beneficial projects such as the construction of three halls in Pagoh worth RM35m.

On May 26, Zafrul responded that as of April 2021 government loans amounted to RM81.8 billion, and about RM99.3 billion as of this month, not RM115.53bn as Najib claimed.

Apparently, Najib has fudged the number by including loans raised by Petronas and Khazanah Nasional Berhad, as well as proceeds from the sale of stakes in Telekom and Silterra for their respective capital and cash flow requirements, and the government's use of the National Trust Fund (Kwan).

All the above, strictly speaking, are not government loans.

"I find the inclusion of such loans and sale of assets extremely puzzling. How can such loans made by Petronas and Khazanah count towards government debt? These loans were made for their capital and cashflow requirements.

"These are debts that Petronas and Khazanah are fully responsible for. How can you consider borrowings by such entities as Federal Government's debt?" Zafrul said in his Facebook post.

According to Zafrul, since January 1, all government loans have been made based on the expenditure approved via Budget 2021 in Parliament. There have been no additional funds as alleged by Najib, except for the usual government revenue which has since decreased significantly due to the pandemic.

"Additionally, the government has never used the Emergency Ordinance as a way to increase government expenditure or increase the statutory debt limit set by Parliament in August 2020," Zafrul added, thus demolishing Najib's argument that the government might have spent recklessly with the Finance Act being suspended.

As for the RM5bn drawn from the Kwan fund which will be used mainly for purchasing vaccines, it is not a loan but conveniently inserted by Najib in his list to artificially increase the amount of government loan. 

It's actually government reserves built over the years since the 1960s for use by future government. And the Muhyiddin administration is not the first to use the Kwan reserves. 

It seems his hatred for Muhyiddin – whom he has mercilessly sacked from Umno for opposing his scheming in 1MDB – is so strong that he was among the first to say the Muhyiddin administration is raiding the Kwan funds when the government announced its use for the purchase of vaccines. Unless he can prove the Kwan monies are being used for hanky-panky, how can the use of taxpayers' monies to benefit taxpayers be described as a money raid.

On the RM81.8bn loans that have accumulated as of April, Zafrul explained it comprises RM36.1bn to refinance debts that have reached maturity, while RM50.2bn is used as development expenditure which includes expenditure from the Kumpulan Wang COVID-19, of which RM17bn is for 2021.

This encompasses initiatives such as Bantuan Prihatin Rakyat, Wage Subsidy Program, Jaringan Prihatin and Program Belia either completed (monies used already), or about to be launched throughout MCO 2.0 and MCO 3.0 this year (monies still available). 

Kumpulan Wang COVID-19 was established from the proceeds of the government's RM666m Sukuk Prihatin launched on Aug 18 which surpassed the original target of RM500m, and issued on Sept.

Zafrul also clarified on some issues Najib has been misrepresenting the public. One of these is the fact the government has never made any borrowings outside its annual Budget or off-balance sheet borrowings, unlike the Najib administration which racked up an off-balance sheet financing amounting to RM50bn.

What's more, between 2008 and 2017 under Najib, the federal debt level rose over 120%, but most significantly government guarantees rose by over 240%. And yet there was no unprecedented pandemic like COVID-19 that he had to face, with the concomitant confluence of three major issues occurring at the same time – public health, economic downturn and political instability. 

The contingent liabilities of a high government guarantees and off-balance sheet borrowings of the Najib administration burst asunder with the infamous 1MDB fiasco whose ramifications are still being felt today when the present government has to shoulder a lot of legacy debts by 1MDB, SRC, SSER, etc.

"The unfortunate truth is that a lot of the Government funds go towards servicing these debt liabilities – approximately 15% of all Government's debt is in the form of 1MDB's guarantee and debt commitments … in short, this government (PN) has inherited a large amount of debt but currently faced with a lower capacity to meet these financial commitments," said Zafrul.

Contrary to what Najib claimed over and over again, that the government since the time of Pakatan Harapan (PH) has not paid a single cent of 1MDB debt when according to him, MDB left behind assets plus the funds garnered from its asset recovery efforts that can be used to pay off its debt, Zafrul said the government has repaid RM12.4bn of 1MDB debt and RM3.1bn of SRC debt, "and yet we still have to settle the principal as well as coupon, profit or interest payment for the bonds, sukuk and term loans amounting to RM39.8bn for 1MDB and RM2.7bn for SRC".

Thus, besides the federal debt, the government also has to honor guarantee commitments for 1MDB, SRC and SSER. Again, contrary to what Najib said, these projects do not generate income to settle their loan principal and interest. "What is even more saddening is that in most cases, we don't even know what benefits these debts have given to the country," added Zafrul.

If there is no 1MDB fiasco, these billions of debts could have been used to benefit the rakyat during the pandemic as pointed by Zafrul and many other opposition figures, and in this it shows how unremorseful Najib is in bringing down the country into the abyss.

"All our calculations and loan obligations are recorded based on practices established by past administrations in Malaysia," assured Zafrul.

One devious tactic used by Najib to confuse the rakyat is his insistence that government debt has breached the 60% threshold agreed to by Parliament when what the government and Parliament have in mind is statutory debt, not just any debt, which remains near 60% but still below 60%.

Finally, the rakyat must know loans used to support government initiatives and programs are recorded in the government's financial statements and subjected to annual audit.

(Jamari Mohtar is Director of Media & Communications at EMIR Research, an independent think-tank focused on strategic policy recommendations based upon rigorous research.)