5:14pm 12/07/2022
Country’s finances can collapse under the weight of excessively bloated civil service
By:Sin Chew Daily

The massive civil service payroll and pension payout, fast swelling external debts and our dwindling foreign reserves will have to be supported by rapid economic growth, monetary stability as well as significantly improved national competitiveness.

Tun Daim Zainuddin, the former finance minister during Mahathir’s time, re-mentioned the worrying phenomenon of a grossly bloated Malaysian civil service, during a recent interview with The Malaysian Insight.

This issue is no longer new. Even Dr. M himself hit out at Najib’s administration for the excessively bloated civil service, when he became prime minister for a second time, although he did not take any action to trim the civil service himself.

To get the government to trim the bloated civil service is almost a “mission impossible” because the country’s 1.7 million civil servants and 700,000 retired civil servants are an enormous vote bank for the ruling party, and believe me, no one is going to poke the beehive. But, to temporarily freeze hiring unnecessary civil servants shouldn’t be so hard a thing to do, right?

Daim said the country’s finances were in a very bad shape: pensions, lucrative wages paid to civil servants, along with interests for public debts. Indeed, this country could go bust because of the unrealistically high numbers of unproductive civil servants!

Greece, one of the EU “PIIGS”, declared bankrupt in 2015. As a matter of fact, the country already owed to the tune of €300 billion back in 2010.

Civil servants, who made up 22% of the country’s total workforce, worked only five hours a day, and could apply for retirement benefits from as young as 40 for up to 60 years, while their counterparts in much more affluent fellow EU states such as Germany and France can only retire at 65.

Sounds familiar? You’re right. We are now moving down the same path of Greece before it declared bankruptcy. We have way too many redundant civil servants that are poised to empty our national coffers.

Sri Lanka just declared bankruptcy two days ago with a hefty US$51 billion debt and $7 billion of debts and interests due this year, with zero foreign reserves.

Prior to this, this South Asian country also faced the same issue of bloated civil service, and because of that, the government had to put them on a four-day week so that they could spend a day working in the fields to address the country’s acute food shortage problem.

Are we not also promoting the four-day week now? This speaks volumes of the reality that we have a serious oversupply of civil servants!

Our 2022 Budget of RM332.1 billion makes up about 20.3% of the country’s GDP, with an estimated budgetary deficit at 6% of GDP.

The government has divided the Budget into four major parts: RM223.5 billion for operating expenditure, RM75.6 billion for development, RM23 billion for Covid-19 fund and RM2 billion for emergency reserves.

A big chunk of the operating expenditure which makes up 67.3% of the entire Budget allocations is used to pay for civil servants’ salaries and pensions, and some for servicing foreign debts and interests.

Daim said we would have to pay as much as RM200 billion a year for debts in 2030. And he was absolutely right.

The RM75.6 billion development expenditure will never be sufficient to cope with infrastructure construction, and we will need to borrow more in order to implement these projects.

The various financial assistances and subsidies provided to help the people tackle the spiralling inflation has so far drained an additional RM80 billion, but ever wonder where the money came from?

Our heavy foreign debts and limited foreign reserves are two other critical factors other than the bloated civil service that will sink the country deep into a fiscal dilemma.

As of March this year, Malaysia’s external debts ran as high as US$264.5 billion or about 67.5% of our GDP, a whopping $5.3 billion (or RM23.6 billion) increase from the $259.2 billion registered last December.

Due to ringgit devaluation, our foreign debts soar to RM1.177 trillion. We can understand why Daim said we would need RM200 billion just to service our debts and interests in 2030, by which time our operating expenditure should balloon to RM400 billion. That should double our budgetary allocations to RM650 billion in 2030, compared to 2022. This also means we must double our GDP within the next eight years to make such allocations viable.

Meanwhile, Malaysia’s foreign reserves stood at $109.2 billion (approximately RM486 billion) as of June 15, down $3.6 billion from May 31, the sharpest two-week decline since July 2015, according to Bloomberg.

That being said, Bank Negara reassured that our foreign reserves position was sufficient to finance 5.5 months of imports and is 1.1 times our short-term external debt.

The massive civil service payroll and pension payout, fast swelling external debts and our dwindling foreign reserves will have to be supported by rapid economic growth, monetary stability as well as significantly improved national competitiveness.

The country’s future is bleak unless our leaders will draw up mid- to long-term plans to simultaneously cut expenses (trimming civil service and external debts) and increase revenue (boosting GDP growth through enhanced competitiveness).



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