KUALA LUMPUR, July 14: Malaysia may struggle to fund an ambitious series of measures to revive its recession-bound economy, given the daunting price tag of nearly $12 billion and few clues where the money will come from.In an announcement on Monday, part of a series over the last one month, deputy prime minister Anwar Ibrahim detailed new fiscal measures to stimulate the economy, but sidestepped the issue of how they will be funded.
He confirmed that the Malaysian economy was expected to report a one to two per cent contraction this year, but said new fiscal measures which include taking over the banking system's bad loans and recapitalising banks, would bail the country out.
"This is what they ought to do. Banking system is key to any economic recovery," said Liew Yin Sze, chief economist at JM Sassoon & Co in Singapore.
He said the biggest problem the government would face was raising funds for these measures.
"There are some claims that there are foreign investors waiting to put in money...but,I am sceptical," he said. "They have to come out with credible packages and source money overseas. The over 50 billion ringgit ($12 billion) required cannot be raised in the country," he added.
Anwar, who is also the finance minister, has said funds for some of ventures, like the 10 billion ringgit for an asset management company to take over the banking system's bad loans, will be raised through overseas bond issues and borrowings. He said the government's expected budget deficit of 10 billion ringgit ($2.38 billion) will be funded by loans from aid agencies such as the World Bank, Asian Development Bank, Islamic Development Bank and loans from Japan.
The finance minister has announced two funds totalling 12 billion ringgit for socio-economic and infrastructure projects delayed or postponed due to the regional economic crisis and setting up of an agency to help recapitalise banks. "The $12 billion is a bit of an illusion. They only need to raise $3.0 to $4.0 billion now because these are all long-termprojects," said Neil Saker, regional economist with SocGen Crosby in Singapore. He said even raising $3.0 billion would be difficult in the current market."I think it will be difficult, because there are lot of other countries also looking to raise money. Koreans are raising $5.0 billion and Thais another $5.0 billion," he said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
