(Bagan, Friday): On Wednesday, 7 January 1998, Bank Negara issued a two-paragraph statement under the topic "Malaysia External Debt Position" as follows:
"As at end-June 1997, Malaysia's total debt comprising short, medium and long-term debt amounted to US$45.2 billion (42% of GDP). These loans comprise inter-company borrowings, bonds raised in the international capital markets and bank lending. Medium and long-term debt accounted for 70% or US$31.7 billion of total external debt, the bulk of which (63%) are with remaining maturity between four and twenty years.
"Bank Negara Malaysia stated today that Malaysia's short-term debt as at end-June 1997 accounted for only 30% of total external debt outstanding. This contrasted significantly from the ratio published by the BIS of 56% given that BIS data refers only to bank lending, a higher proportion of which is short term. Including medium and long-term debt with remaining maturity of one year, the ratio would be 39%."
This must have been the first time in its 38-year history that Bank Negara had issued a public statement on the external debt position of the country.
This was the result of the release of the latest report by the Bank for International Settlements (BIS) in Basle, Switzerland on Monday on "The Maturity, Sectoral and Nationality Distribution of International Bank Lending" for the first half of 1997, which said Malaysia’s short-term debt accounted for 56 per cent of total loans in the first half of last year, compared to 59 per cent for Indonesia and 52 per cent for China.
As for South Korea and Thailand, BIS said by mid-1997 the share of short-term debt had risen to 67.9 per cent and 65.7 per cent respectively.
It also said overall, the share of short-term debt incurred by Asian borrowers rose to 62.2 per cent of their total borrowings of US$389.4 billion by mid-1997, from 61.5 per cent at end-1996.
"Short-term loans accounted for a significant proportion of new bank lending to Asia, leading to an increase in the relative weight of this maturity bracket in the total outstanding," said the BIS.
In issuing this statement, Bank Negara was clearly trying to dispel the impression that Malaysia’s short-term debt position was in the same category as the other troubled economies which have necessitated rescue and bail-out by the International Monetary Fund, like Thailand, Indonesia and South Korea, but it is not certain whether Bank Negara has succeeded in this objective.
In trying to distance Malaysia from Thailand, Indonesia and South Korea as in having a high proportion of short-term loans, Bank Negara announced that Malaysia’s external debt was in fact much larger than the US$28.8 billion computed by BIS when taking into account inter-company borrowings and bonds raised in the international capital markets, and using this larger total the percentage of short-term bank loans accounted for only 30 per cent of total external debt and not 56 per cent as reported by BIS.
However, if the BIS had also used the similar criteria of short-term bank lending to compute the percentage of short-term loans to total external debts in the case of other countries, then Malaysia would still be comparatively at par with Thailand, Indonesia and South Korea. The question is whether this is the position.
However, in seeking to rebut the BIS report by stating that Malaysia’s total external debt at end-June 1997 was actually US$45.2 billion, which is much larger than that computed by BIS to derive a lower percentage of short-term loans to the total external debt, Bank Negara has opened up a pandora’s box.
This is because nobody had ever known that Malaysia’s external debt was US$45.2 billion as at the end of June last year until the two-paragraph statement by Bank Negara on Monday.
It sent rippling shock waves throughout the country that the country had incurred such an enormous external debt, raising the disturbing question what is the external debt today. As on Wednesday, when Bank Negara announced the US$45.2 billion external debt for Malaysia, the exchange rate of the Malaysian ringgit was 4.7250 to a US dollar, which would mean in local currency a staggering external debt of RM213.57 billion!
What is shocking about this figure of US$45.2 billion is that on 5th November 1997, the Deputy Finance Minister, Datuk Dr. Affifuddin Omar informed Parliament that Malaysia’s foreign debt up to June 1997 was RM78.8 billion out of which only RM9 billion was owed by the Federal Government. The rest was RM32.3 billion by the public sector and another RM37.5 billion by the private sector. At the exchange rate of US$1=RM2.52, this would mean an external debt of US$31.3 billion - or a US$13.9 billion difference.
What is the reason for this vast difference in the foreign debt figure as at the end of June 1997 between Affifuddin’s figures in Parliament in November and those of Bank Negara two days ago?
Bank Negara should explain and satisfy the people as to why there is such a colossal US$13.9 billion discrepancy in the national external debt as at the end of June 1997.
Bank Negara had been demanding higher standards of accountability and transparency from banks and finance companies, but it has failed to live up to these high standards itself.
Bank Negara should not only explain the US$13.9 billion discrepancy in the national external debt as at end-June 1997, it should also reveal what is the national external debt as at 31st December 1997.