IMF chief warns of risks for Malaysia

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Public debt has been rising significantly over the past years in Malaysia. Click to enlarge.

International Monetary Fund managing director Christine Lagarde, currently on a Southeast Asia trip, has praised Malaysia for its growth momentum but also warned that the country needs to go ahead to address stagnant foreign direct investment inflows, high debt levels and risks of inequality.

While confident that Malaysia will be able to achieve its targeted 4 to 5 per cent GDP growth this year and lauding Malaysia for its gradual transition from an economy that was largely export-led to one that is more balanced between exports, investment and domestic consumption, the IMF chief pointed at three major risks that Malaysia quickly needed to address.

The first is the foreign direct investment, which she said had yet to return to pre-crisis levels.

Second is the high debt level of Malaysia, she said. In recent years, federal debt of Malaysia was ballooning. Public revenue for 2013 is projected to grow to only RM208.6 billion, while debt is expected to surge to as much as RM502 billion marking a whopping 107.4 per cent increase in debt over the past eight years, which has significantly raised the country’s structural debt service commitments.

Third is the persisting risk of inequality, she said. As wealth distribution in Malaysia remains unequal, income inequality is on the rise between urbanised centers and other regions.

“These inequalities must be on the radar of the authorities now because when a country develops very fast, as it would be for Malaysia in the next eight years, you don’t want to leave people behind,” Lagarde told New Straits Times.

“You want everybody to be carried by the growth path,” she added.

Lagarde urged Malaysia to speed up its fiscal reforms and improve the allocation of public resources by revamping its subsidy and tax regimes to ensure economic stability.

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Reading Time: 1 minute

Public debt has been rising significantly over the past years in Malaysia. Click to enlarge.

International Monetary Fund managing director Christine Lagarde, currently on a Southeast Asia trip, has praised Malaysia for its growth momentum but also warned that the country needs to go ahead to address stagnant foreign direct investment inflows, high debt levels and risks of inequality.

Reading Time: 1 minute

Public debt has been rising significantly over the past years in Malaysia. Click to enlarge.

International Monetary Fund managing director Christine Lagarde, currently on a Southeast Asia trip, has praised Malaysia for its growth momentum but also warned that the country needs to go ahead to address stagnant foreign direct investment inflows, high debt levels and risks of inequality.

While confident that Malaysia will be able to achieve its targeted 4 to 5 per cent GDP growth this year and lauding Malaysia for its gradual transition from an economy that was largely export-led to one that is more balanced between exports, investment and domestic consumption, the IMF chief pointed at three major risks that Malaysia quickly needed to address.

The first is the foreign direct investment, which she said had yet to return to pre-crisis levels.

Second is the high debt level of Malaysia, she said. In recent years, federal debt of Malaysia was ballooning. Public revenue for 2013 is projected to grow to only RM208.6 billion, while debt is expected to surge to as much as RM502 billion marking a whopping 107.4 per cent increase in debt over the past eight years, which has significantly raised the country’s structural debt service commitments.

Third is the persisting risk of inequality, she said. As wealth distribution in Malaysia remains unequal, income inequality is on the rise between urbanised centers and other regions.

“These inequalities must be on the radar of the authorities now because when a country develops very fast, as it would be for Malaysia in the next eight years, you don’t want to leave people behind,” Lagarde told New Straits Times.

“You want everybody to be carried by the growth path,” she added.

Lagarde urged Malaysia to speed up its fiscal reforms and improve the allocation of public resources by revamping its subsidy and tax regimes to ensure economic stability.

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