KUALA LUMPUR (Oct 18): The federal government's debt is projected to rise at a slower pace of 6% in 2025 compared with 7.5% in 2024, according to the Ministry of Finance (MOF) in its Fiscal Outlook and Federal Government Revenue Estimates report.

The country’s national debts stood at RM1.1725 trillion in 2023. As at end-June 2024, the federal government's debt stood at RM1.227 trillion, equivalent to 63.1% of gross domestic product (GDP).

Based on the forecasted rate of increase, a back-of-envelope calculation shows that the national debts will increase to RM1.26 trillion in 2024 and RM1.336 trillion in 2025.

The debt-to-GDP ratio is projected to remain around 64% by the end of 2024 and 2025, said the report.  

“The federal government’s debt growth has continued to demonstrate a downward trend, reducing from 8.6% in 2023 to approximately 7.5% in 2024 and to around 6% in 2025,” the report stated.

Over the past five years, Malaysia's debt-to-GDP ratio has stayed above 60%, with the federal government's debt at RM1.172 trillion at 64.3% GDP in 2023, RM1.079 trillion at 60.3% GDP in 2022, RM979.8 billion at 63.3% GDP in 2021 and RM879.56 billion at 62% GDP in 2020.

The deceleration in growth of the national debt reflects the government’s commitment to achieving a prudent debt level of GDP ratio which should be reduced to less than 60% in the medium term, as stipulated in the Public Finance and Fiscal Responsibility Act 2023 (Act 850), said the report.

The debt, meanwhile, was primarily denominated in ringgit, accounting for 97.6% of the total debt, with the remaining 2.4% in foreign currencies, MOF said.

Resident holdings of the federal government debts as at end-June 2024 amounted to RM944.62 billion, representing 77% of the total debt, and non-resident holdings were at RM282.86 billion or 23% of the total debt.

Banking institutions held the largest composition with a 29.5% share, followed by the Employees Provident Fund (26.4%) and Bank Negara Malaysia or BNM (5.2%).

Insurance companies held 5.2%, followed by the Retirement Fund Inc (2.8%), development financial institutions (2.3%) and others (5.6%).

“Moving forward, the focus should be on enhancing private sector investments, which aim at boosting economic capacity and productivity, thus accelerating the nation's growth,” MOF said.

Meanwhile, the federal government’s borrowings are projected to reduce to RM206 billion at 10.6% of GDP in 2024, as compared to RM226.6 billion at 12.4% of GDP in 2023.

“This will be sourced entirely from the domestic market, with RM84.3 billion allocated for deficit financing while RM121.3 billion for principal repayments,” MOF said.

As at end-August 2024, RM148 billion or 71.2% of total gross borrowings was raised through a combination of 26 Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII) issuances amounting to RM129 billion, and 12 issuances of Treasury Bills totalling RM19 billion.

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