KUALA LUMPUR: There should be a cap on loans guaranteed by the government, says Prime Minister Tun Dr Mahathir Mohamad.
He said the loan amounts should not exceed 55 per cent of Gross Domestic Product (GDP).
“But, there is no limit for government-guaranteed loans, with some reaching up to RM42 billion. We have to look into that,” he said after launching the National Strategy for Financial Literacy 2019-2023.
Dr Mahathir was commenting on recommendations by the Special Parliamentary Committee on the Budget recently to, among other things, review loans guaranteed by the government and impose statutory limitations on the loan amounts.
It was reported that the amount stood at RM137.9 billion as of Dec 31, 2018, with the remaining government-guaranteed loans to be serviced by entities such as, among others, DanaInfra Nasional Bhd (RM52.7 billion), Suria Strategic Energy Resources Sdn Bhd (RM7.9 billion), SRC International Sdn Bhd (RM3.6 billion), TRX City Sdn Bhd (RM485 million) and 1Malaysia Development Bhd (RM5 billion).
In his speech, Dr Mahathir said Malaysia’s household debt to GDP ratio was 82.1 per cent, higher than those in countries with higher per capita income, including Italy (40.3 per cent), Japan (58.1 per cent) and the United States (76.3 per cent).
“Even though the risks posed by household debt on domestic financial stability remain under control, there are signs that some borrowers are having difficulties in servicing the loans.
“This occurred especially among borrowers with less than RM5,000 monthly income living in the cities.
“This observation is also supported by the increase in borrowers participating in the Debt Management Programme by the Credit Counselling and Debt Management Agency.”
Dr Mahathir said the National Financial Literacy strategy was imperative for developing a society that can make wise financial decisions.
He said it was important that the people improve their financial literacy to avoid falling prey to scams.
He said the initiative was an effort by the Financial Education Network spearheaded by Bank Negara Malaysia and the Malaysian Securities Commission.
“The National Strategy for Financial Literacy is crucial in developing a society that is able to make sound financial decisions so that they could be free from burden and mistakes in financial management,” he said.
Dr Mahathir said, to better protect borrowers, the government was in the midst of drafting a bill to enact the Consumer Credit Act.
The bill, he said, would be tabled in Parliament soon.