Malaysia's net external borrowingsfor 1987 are expected to be maintained at around last year's
levels of about 1.45 billion ringgit, Zain Azraai, secretary
general to the Finance Ministry, told an investment seminar
here.
    Malaysia's debt service ratio will also be maintained at "a
level no higher than 20 pct," he said. "This is well within the
capacity of the nation to service."
    Azraai said the 1986 foreign borrowing level and projected
estimates of 1987 compared favourably with the peak of around
5.5 billion ringgit in 1982.
    Malaysia's external debts total 48 to 49 billion ringgit
and its debt service ratio exceeds 20 pct, the Development Bank
of Singapore Ltd, one of Singapore's four major local banks,
said in a report released this week.
    Azraai said: "While the growth in debt has been rapid in
recent years, it is still within the limits of prudence and
conscious efforts have been made and will continue to be made
to decelerate and restrain external borrowings."
    He said the Malaysian government is urgently addressing the
twin deficits of the Federal Budget and the balance of payments
which followed two recessions in the 1980s.
    Azraai said Malaysia's public sector deficit had risen due
to the contraction in the government's resources as well as the
rapid growth in public expenditures.
    With declining incomes and export earnings, the bases for
resource generation became limited, and the government will not
raise taxes because current tax margins are high compared to
Malaysia's neighbours, he said.
    "As such the remaining avenue for rationalising and
consolidating the budget is through expenditure reductions," he
said.
    Azraai said the Malaysian government's development
expenditures were cut by about 25 pct in 1987, while those of
state enterprises were reduced by 41 pct.
    He said: "A commitment has been undertaken to reduce the
budget deficit over time and to balance the Federal
government's budget current account deficit by 1989."
    Malaysian Finance Minister Daim Zainuddin presented a
budget for 1987 which foresees a deficit of 9.4 billion
ringgit, down from 11.6 billion in 1986, with federal spending
targetted at 27.4 billion, down from 30.8 billion, and revenue
at 18 billion against 19.2 billion.
    Azraai said the government will cut the size of the public
sector and privatize those operations which may be better run
by the private sector. New measures have been introduced to
boost the private sector and attract foreign investment.
    A higher proportion of foreign ownership, even up to 100
pct, is now possible for new investments in the manufacturing
sector made between October 1986 and December 1990, he said.
    "The long term prospects of the Malaysian economy are bright
... Indications are already available to show that the economy
is recovering and that growth will be positive and stronger
than originally expected," Azraai said.
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