PETALING JAYA: Former prime minister Najib Razak has poured scorn on finance minister Tengku Zafrul Aziz’s explanation over the government’s rationale to dip into the National Trust Fund (KWAN) for Covid-19 vaccine expenses, describing it as “unbelievable”.
This comes after Tengku Zafrul said the original RM3 billion allocated for the purchase of the Covid-19 vaccines was never accounted for in the 2021 budget.
“It is certainly unbelievable that such an important spending as vaccines was never allocated for in the government’s RM310 billion budget last year,” Najib told FMT, adding that he was “surprised” with Tengku Zafrul’s explanation.
“The original RM3 billion allocation must have been diverted elsewhere.”
Najib, who was in Parliament when the budget was tabled, said he clearly remembers minister in charge of vaccinations Khairy Jamaluddin saying that the RM3 billion was enough to vaccinate 83% of the population, with RM2 billion being used to buy vaccines and RM1 billion for contingent costs of vaccinations.
“Now it has increased to RM5 billion – RM3 billion to buy vaccines and RM2 billion is for the logistics of carrying out the vaccinations.
“Are we to believe that vaccines suddenly cost 50% more while logistics cost has increased 100% within five months between last December and April?”
Najib, a former finance minister, said KWAN funds give “pretty good” returns on assets of 6.3% on average, and that this was higher than the borrowing cost of long-term government bonds.
He cited the example of the government’s recent domestic borrowing of RM4.5 billion (at an interest rate of 3.48%) and the RM5.4 billion 10-year sukuk raised from foreign markets with an interest rate of 2.07%.
“So, any reasonable person will ask, why are you dipping into a trust fund that pays you 6.3% returns instead of borrowing internationally at 2.07% or domestically at 3.48%?
“The much-feared RM1 trillion national debt figure and the government limits on debt-to-GDP ratio is most probably the reason why the government decided to dip into KWAN to fund the entire RM5 billion for vaccines.
“It would be politically damaging for the Perikatan Nasional government to be the first government in the country to breach that limit.”
He said the RM1 trillion mark would refer to direct government debt and does not include the contingent liabilities and government guarantees the former Pakatan Harapan administration included in its debt calculations.
Najib said that when his administration lost power, government debt stood at RM686.8 billion with a debt-to-GDP ratio of 48.7%.
This, he said, went up to RM793 billion as of end 2019. By the end of 2020, the debt had ballooned to RM879.6 billion which is 62.2% of the GDP. This is higher than the 60% limit.
So, Najib said, dipping into the KWAN funds will not increase the debt levels and breach the RM1 trillion mark.
“This is similar to how the PN government got Petronas to sell assets such as KLCC and MISC shares worth RM3 billion in December 2020 and also how it got the company to take on an additional US$6 billion (RM24.7 billion) new loans in April 2020 so the dividend from Petronas increased to RM34 billion although Petronas lost RM21 billion last year.
“Last week too, Petronas borrowed another US$3 billion (RM12.4 billion) from international markets,” he said, adding that he believes Petronas will be asked to sell more shares this year.
“Dividends from Petronas are considered income to the government and not debt. The debt is now carried by Petronas.”
Najib added that he suspects the government will seek higher dividends from Petronas this year, more than the RM18 billion it intended to give this year, to avoid adding to government debt.