KUALA LUMPUR (June 18): Prime Minister Datuk Seri Najib Razak revealed to Parliament today that the government has issued letters of support (LOS) totalling US$3 billion as of end 2014.

Najib who is also the Finance Minister, however, opined that the government is cautious in giving guarantees.

The issuance of LOS has been criticised by opposition lawmakers in the past as a letter of support is usually issued to a lending institution by a parent company acknowledging support of a subsidiary company's attempt for financing.

But a letter of support, however, creates a moral obligation for the parent company rather than a legal one especially because in the worst-case scenario, where the subsidiary is unable to repay the debt, the parent company may be on liable for the full amount.

"Based on LOS records given by the government until 2014, a total of USD$3 billion or RM9.5 billion.

"As of today, the loan repayments are good and are accordance to the fixed schedule without any defaults," he said in his written reply to Indera Mahkota MP Datuk Fauzi Abdul Rahman.

Fauzi had asked Najib to state the country's total debt at present including any form of letters of guarantee or LOS and letters of comfort.

But he opined that the government continues to be committed to ensure that the debt of the government is not above 55% of the gross domestic product (GDP).

This is to ensure that the debt level of the federal government is low and manageable, he added, pointing out that the fiscal consolidation is on-going to reduce the deficit in stages.

Meanwhile, Najib also said that the government has guaranteed debts totalling RM172 billion or 14.7% to the GDP as of end 2014.

Of which the guarantees were given to public entities implementing infrastructural projects like DanaInfra Nasional Bhd and Prasarana Malaysia Bhd that is involved in infrastructural development and public transportation, he added.

Najib explained that the federal government does from time to time gives its guarantee to statutory bodies and government-owned companies so that they can take loans for development projects that benefit the people.

As of end of March 2015, the total debt for the federal government is RM596.8 billion or 51% to the GDP, said Najib.

Of which 97% or RM579.2 billion is categorised as domestic debt while the balance of RM17.6 billion or 3% is offshore loans, he added.

However, Najib opined that the debt to the federal government is manageable and that it is a country categorised with average debt.