Some issues on development finance

Abstract

The first part of this paper is to present some indications of the extent to which the Malaysian government has relied on domestic sources for financing its expenditure. Lending agencies, including the World Bank, look closely at a country's own efforts to overcome the internal obstacles to its development before they do business with it. In part, this stems from the moral judgement that only those who help themselves deserve to be helped. It has also come to be recognized that a country's ability to service external debt depends to a large extent upon two things: first, its ability to invest in such a way as to obtain a sustained increase in its real national product and second, its ability to save a growing proportion of this increase. If a country can do these two things, then the growth of its external debt gives less cause for alarm than is sometimes supposed. Two sources of government finance are examined here. They are government tax revenue and public borrowing from domestic capital market.