Malaysia: Public servant loans could trigger crisis

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ForeclosureMalaysia could fall into a similar subprime crisis that plagued the US in 2007 if the federal government carries on with the unplanned sale of housing loans undertaken by its massive civil force, an opposition lawmaker said on December 26.

Rafizi Ramli, the opposition party PKR’s strategic director, dismissed the Malaysian government’s defense of its sale of national assets and government mortgages to raise revenue, saying such actions smacked of desperation and were not how a sovereign nation’s economy should be carried out.

“If we allow the federal government to continue to do this unchecked, it’s a recipe for disaster, as what happened in the US,” Rafizi a new conference.

 The Finance Ministry said on December 24 that the liquidation of national assets was “common and openly conducted by governments to drive the economy”.

But Rafizi pointed out that the government was forced to make an unplanned sale of national assets and government mortgages for $431 million and $1.3 billion, respectively, due to overspending and slower than predicted economic growth this year, as mentioned by the World Bank’s Malaysia Economic Monitor: December 2013 report.

The World Bank said that Malaysia was expected to meet its target deficit this year at 4 per cent of the GDP due to revenue from non-tax sources amounting to $2.3 billion, including the sale of national assets and government mortgages, despite exceeding the budget for operating expenditure by 7.1 per cent, or $4.4 billion.

Rafizi added that the threat of a financial crisis would be further exacerbated in the event of civil servants’ failing to service their housing loans, as the biggest buyers of their mortgages were likely government institutions, such as the Employees Provident Fund and asset manager Permodalan Nasional Berhad.

Malaysia’s 1.3 million civil servants have faced less hurdles in seeing their loan applications approved, compared to their peers who fall into a similar income bracket in the private sector.

The government institutions are likely the largest buyers of such mortgages, as the recent dip in the value of the ringgit showed foreign investors’ declining interest in Malaysia.

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Reading Time: 2 minutes

Malaysia could fall into a similar subprime crisis that plagued the US in 2007 if the federal government carries on with the unplanned sale of housing loans undertaken by its massive civil force, an opposition lawmaker said on December 26.

Reading Time: 2 minutes

ForeclosureMalaysia could fall into a similar subprime crisis that plagued the US in 2007 if the federal government carries on with the unplanned sale of housing loans undertaken by its massive civil force, an opposition lawmaker said on December 26.

Rafizi Ramli, the opposition party PKR’s strategic director, dismissed the Malaysian government’s defense of its sale of national assets and government mortgages to raise revenue, saying such actions smacked of desperation and were not how a sovereign nation’s economy should be carried out.

“If we allow the federal government to continue to do this unchecked, it’s a recipe for disaster, as what happened in the US,” Rafizi a new conference.

 The Finance Ministry said on December 24 that the liquidation of national assets was “common and openly conducted by governments to drive the economy”.

But Rafizi pointed out that the government was forced to make an unplanned sale of national assets and government mortgages for $431 million and $1.3 billion, respectively, due to overspending and slower than predicted economic growth this year, as mentioned by the World Bank’s Malaysia Economic Monitor: December 2013 report.

The World Bank said that Malaysia was expected to meet its target deficit this year at 4 per cent of the GDP due to revenue from non-tax sources amounting to $2.3 billion, including the sale of national assets and government mortgages, despite exceeding the budget for operating expenditure by 7.1 per cent, or $4.4 billion.

Rafizi added that the threat of a financial crisis would be further exacerbated in the event of civil servants’ failing to service their housing loans, as the biggest buyers of their mortgages were likely government institutions, such as the Employees Provident Fund and asset manager Permodalan Nasional Berhad.

Malaysia’s 1.3 million civil servants have faced less hurdles in seeing their loan applications approved, compared to their peers who fall into a similar income bracket in the private sector.

The government institutions are likely the largest buyers of such mortgages, as the recent dip in the value of the ringgit showed foreign investors’ declining interest in Malaysia.

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