Dr M: Opposition wants a bankrupt nation

By FMT Staff

KUALA LUMPUR: Former prime minister Dr Mahathir Mohamad believes that the opposition is against the government's move to cut subsidies because it wants the country to go bankrupt.

If this happens, he said, the Barisan Nasional would be defeated in the general election.

However, the 84-year-old statesman added a note of caution. “You may defeat the government but if you inherit a bankrupt country, you will not be able to turn around the country either.”

Mahathir was responding to the criticism concerning Minister in the Prime Minister's Department Idris Jala's statement that Malaysia could go bankrupt if the government continues with the high subsidies for various items.

“Everybody must have read about the fate of Greece whose borrowings exceeded its GDP. The European Union had to bail out Greece to the tune of 300 billion euro [RM1.2 trillion] to prevent it from going bankrupt and pulling down the European Union with it.

“Already the euro has depreciated substantially and many are predicting the demise of this European common currency. The European economy, once powerful and rich, faces the possibility of a recession, simply because of the bankruptcy of one of its members,” he said in his blog.

Borrowing money is not the answer

Mahathir also pointed out that Idris was not predicting bankruptcy anytime soon, as the latter had said if the debt goes up by 12% per annum, Malaysia would be bankrupt by 2019 when its debt equals its GDP.

“What Idris is saying is that if we continue with the present level of subsidy [already reaching RM74 billion per annum] and we cannot pay our debts, we will certainly not be able to arrest the slide.

“To pay our debts we must cut back on spending, A big item is the subsidies for food, fuel and power, health, education and tolls,” he said.

However, Mahathir believes the government will not cut subsidy, “or at least not much”, on food, health and education but the subsidies for fuel and power and toll payments should be gradually reduced.

“When I was prime minister, the price for one barrel of oil was only US$30. The subsidy was not too big. It is now US$80. To keep the same price would mean to increase the amount of subsidy to make up the difference.

“Similarly when the government agreed not to increase toll rates it has to reimburse the losses sustained by the operators. This cost a lot of money,” he said.

“Borrowing money to pay for the increasing cost of subsidy is not the answer. A good government must ensure that servicing loans is sustainable,” he added.