KUALA LUMPUR: Malaysians have been assured that the economy is supported by strong fundamentals and sustainable to overcome weakening global economic conditions, said Minister in the Prime Minister’s Department Datuk Seri Wahid Omar.
The former banker, who had witnessed the 1997/98 economic crisis first hand and described it as “very frightening”, said the situation today was very different.
“During that time, liquidity in the banking sector was tight.
Large outflows led to liquidity crunch and interest rates jumped to 18-22 per cent. Companies had large debt levels of about 83 per cent compared to 56 per cent now.
“Many of our companies also borrowed in US and foreign currencies that time, compared to corporate debts now mainly in ringgit.
As a result, many companies faced difficulties in 1997/98 and some even went bankrupt,” he said on TV3’s “Soal Jawab” programme last night.
Wahid said Malaysia’s international reserves in 1997/98 were around US$30 billion, which were enough to sustain about seven months of imports. “Since 1998 we managed to increase our reserves to US$93.3 billion now, which can be used to curb the outflow of funds,” he added.
On the weakening ringgit, Wahid said the current situation is more balanced compared to 1997/98, because while imports will be more expensive, at the same time our exports will also be more competitive.
He said when Prime Minister Datuk Seri Najib Razak was in New York recently, he had met with fund managers and investors there and stressed on the positive indicators of the Malaysian economy.
These include the country’s steady GDP growth, reduced fiscal deficit, poverty eradication, positive endorsement by rating agencies, and Malaysia’s position among to most competitive economies in the world.
Wahid said the Malaysian economy has successfully diversified into manufacturing and services sectors, and no longer dependent on commodities alone.
“The 2009 fiscal deficit was 6.4 per cent but we committed to reducing it and culminated in the introduction of Goods and Services Tax (GST) which was introduced this year.
Eradication of poverty has also been successful while our millennium goals have been met,” he said.
He also addressed the elephant in the room, saying that the Prime Minister has already announced that 1Malaysia Development Bhd’s debt burden will be settled by end of the year.
“1MDB assets will have to be sold in a transparent manner including Edra Global Energy Berhad and other assets,” he added.
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