Is Malaysia a bankrupt nation?

KUALA LUMPUR 13 July - For the past several months, social media was swamped with claims that Malaysia is going to be bankrupt.

Netizens flooded the virtual world with Tik Tok videos, Twitter and WhatsApp messages adamant that Malaysia is set to follow the footsteps of Sri Lanka.

But do these "bankrupt" videos and messages hold any water? Is there any truth in their content?

Malaysia's economy still robust

Obviously, to be a bankrupt nation, the economy of a country has to collapse.

The bankrupt country would have no economic activity, zero cash, zero savings and zero exports.

Malaysia's exports on the other hand are burgeoning and resilient so much so, that Bank Negara Malaysia had to slap higher interest rates to cool down the economy and bring down the inflation rate.

After being shackled at home for two years due to the movement control order, pent up emotions drove Malaysians crazy over the last few months once the borders reopened. 

These are not the tell-tale signs of a bankrupt country and according to Finance Minister Tengku Datuk Seri Zafrul Aziz, Malaysia is on track to register between 5.3-6.3 percent economic growth this year.

Malaysian banks still solid

For any country to be bankrupt, banks would be the first to collapse.

In such an event, the country's financial and banking system would buckle under the weight of a financial crisis.

The rakyat would scramble to withdraw their monies with long, long queues snaking outside the bank having lost their confidence in the banks and the economy.

The rakyat would pull each other's hair to scrounge whatever money they could salvage in their accounts such as those seen in Venezuela and Greece.

Malaysia's exports still thriving at breakneck speed

One of the reasons why Sri Lanka's economy collapsed is because it solely depended on tourism to survive.

Professor Datuk Dr Ahmad Ibrahim said due to that reason, Sri Lanka's economy fell flat due to pandemic hurting the country's economy.

"Malaysia meanwhile is different because our economy is diversified such as oil, palm oil and manufactured goods.

Thus, our economy is able to ride the pandemic and endure the global economic shocks," the UCSI lecturer told DagangNews.

MIDF Research has maintained its projection for exports and imports to grow at 16.9 per cent and 19.2 per cent, respectively, following the release of Malaysia's May 2022 trade figures.

It said Malaysia's total trade expanded by 33.6 per cent year-on-year to RM228.4 billion in May, driven by an acceleration in both exports and imports while cumulatively, total trade rose to RM1.09 trillion in the first five months this year, touching the RM1 trillion mark faster than last year on the back of robust external demand and high commodity prices.

Domestic consumption will grind to a halt

Whenever a country is bankrupt, the rakyat will not spend anymore and everybody is hanging tight to whatever cash they have.

Investments within and outside the country would cease causing the ringgit to crash due to poor economic sentiment.

In some cases, the currency would be worthless such as in Venezuela due to hyper-inflation of almost 1,000 percent.

Malaysia would seek IMF's help

During the regional economic crisis of 1997, several neighbouring countries of Malaysia had to take up loans from the International Monetary Fund and the World Bank.

Malaysia has so far not done so and this is indication that Malaysia is not a bankrupt country yet.

To avert bankruptcy, diversify the economy

The probability of Malaysia becoming bankrupt could be averted by diversifying its economy.

Dr Ahmad said the country's income from palm is sizable and we earned big bucks from the medical gloves export, where demand ballooned during the pandemic.

"Of course, our manufacturing business has also brought in significant revenue through export.

"This goes to show the important role of economic diversity in shoring up our economy," Ahmad told DagangNews.

Beware of corruption

However, Malaysia could be a bankrupt country if its leaders continue to backstab each other and continue with their corrupt ways.

Independent analyst P. Gunasegaram reportedly said if Malaysia continues to tolerate corruption, the country could be bankrupt like Sri Lanka in 10 years.

The rakyat must make sure that Malaysia does not fall into bankruptcy by electing clean leaders at the next general election. - DagangNews