KUALA LUMPUR (Oct 18): The federal government’s committed guarantee, which forms its debt and liabilities exposures, increased to RM231.4 billion as at end-June 2024, against RM227.4 billion in 2023. 

The share of gross domestic product (GDP) ratio, however, dropped to 11.9% at end-June, compared with 12.5% in 2023, according to the Ministry of Finance (MOF)’s 2025 Fiscal Outlook and Federal Government Revenue Estimates report.

Committed guarantees are part of the federal government’s financial guarantees which consist of recipients that receive financial support from the government “under extenuating circumstances to sustain the form of temporary cash flow injections, working capital or partial interest repayment”. 

Committed guarantee forms part of the federal government’s total debt and liabilities exposure, which went up to RM1.596 trillion as at end-June 2024, including the national debt of RM1.227 trillion (63.1% of GDP) plus other liabilities of RM137.9 billion (7.1%), the report said.

The report said the committed guarantees represent 56.7% of the total outstanding financial guarantees of RM407.8 billion (20.9% of GDP). Worth noting that the government has set quantitative values for financial guarantees not exceeding 25% of GDP to control the risk exposure and support fiscal consolidation efforts. 

The MOF attributed the rise in committed guarantees to higher financing needs for the construction of the East Coast Rail Line (ECRL) project, which has progressed rapidly, reaching 67% of completion. 

It noted the marginal increment of committed guarantees indicates enhanced fiscal discipline and improved governance in “reigning risk exposure arising from financial guarantees”.

Among the largest committed guarantees are Danalnfra Nasional Bhd with RM81.79 billion as at end-June 2024, accounting for 35.3% of the total, followed by Malaysia Rail Link Sdn Bhd with RM48.32 billion (20.8%), Prasarana Malaysia Bhd with RM41.36 billion (17.9%), Urusharta Jamaah Sdn Bhd with RM23.26 billion (10%), and Federal Land Development Authority (Felda) with RM6.93 billion (3%).

Other recipients of committed guarantees include 1Malaysia Development Bhd (1MDB)(RM5 billion), Turus Pesawat Sdn Bhd (RM4.185 billion), GovCo Holdings Bhd (RM3.7 billion), and MKD Kencana Sdn Bhd (RM3.2 billion).

Besides committed guarantees, recipients of Act 96 guarantees are Projek Lebuhraya Usahasama Bhd (RM11 billion), Pengurusan Air SPV Bhd (RM6.45 billion), Suria Strategic Energy Resources Sdn Bhd (RM5.97 billion), and Jambatan Kedua Sdn Bhd (RM5.027 billion).

There is a total of RM330.8 billion guarantees issued under Act 96 as at end-June 2024 — the amount includes committed guarantees granted. Under this Act, the entity receiving the government guarantee for financing raised is gazetted as body corporate. 

The infrastructure projects remained the largest recipient, mainly to execute public transportation projects, such as the Mass Rapid Transit (MRT), ECRL and Light Rail Transit 3 (LRT3), as well as highways.

The second largest segment is services, mainly for education and civil servants’ home financing, while the remaining segments include utilities, investment holdings, plantations and financial services.

“Moving forward, the government intends to review and integrate all guarantee-related Acts into a single, comprehensive legislation to strengthen fiscal governance, in accordance with global best practices and international standards,” the MOF said.

Click here to read more about the Economic Report 2024/2025.