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KUALA LUMPUR (Oct 7): The World Bank says Malaysia’s large maturing debts are normal and not a major concern, as long as the government can roll over its debt — or issue new bonds to replace old ones.
However, it flagged the planned cut in development expenditure as a bigger issue, warning it could hurt long-term growth. Debt servicing costs are rising, reducing funds available for development projects.
“The question should be, can a country roll over its debt? Look at the [government bond] issuance schedule. We have seen higher rollover debt before, and we were able to roll over. As to how the future pans out, I can’t say, but it is being looked at closely by both Bank Negara Malaysia and the Ministry of Finance,” World Bank economist Deisigan Shammugam explained during a press briefing on Tuesday.
Malaysia’s auditor general has flagged concerns over RM490 billion in government debt maturing over the next five years, urging prudent debt management and continued fiscal consolidation. As of end-2024, total government debt stood at RM1.25 trillion.
World Bank economist Dr Apurva Sanghi said the focus shouldn’t just be on the amount of maturing debt, but also on rising debt servicing costs and debt-to-gross domestic product (GDP) levels.
He warned that higher debt payments reduce room for development spending, and said debt should be measured relative to GDP to assess how well it supports economic growth.
Citing the 13th Malaysia Plan (13MP), Malaysia’s annual development expenditure under the plan is to average 3.3% of GDP over the five-year period, while it averaged 4.4% of GDP under the 12MP.
“While cuts in spending contribute to fiscal consolidation, these need to be the right kind of cuts — balanced with sustained spending on development,” Apurva advised.
Malaysia’s debt-to-GDP stood at 63.1% in 2024. The Fiscal Responsibility Act sets out a debt-to-GDP ceiling of 60% over the medium term (three to five years).
Apurva said Malaysia needs to broaden its revenue base, noting that the country's revenue-to-GDP has dropped sharply from 2012 to 2025, meaning government income hasn't kept up with economic growth.