KUALA LUMPUR (Oct 10): The federal government’s debt ratio remained broadly unchanged at 64.7% of gross domestic product (GDP) as at end-June 2025, compared with 64.6% at the end of 2024, in what marks the first full fiscal year under the Public Finance and Fiscal Responsibility Act 2023 (FRA).
Enacted in 2023 as part of the government’s institutional reforms to strengthen fiscal governance, the law sets out statutory targets for fiscal consolidation, including bringing the fiscal deficit down to 3% of GDP and reducing overall debt to below 60% of GDP over the medium term.
According to the Ministry of Finance’s (MOF) Fiscal Outlook 2026 report, total federal government debt stood at RM1.304 trillion as at June 2025, of which 98.3% comprised domestic borrowings, while offshore debt made up 1.7%. Malaysia relies strongly on the local bond market and preference for ringgit-denominated financing.
The government’s gross borrowings are projected to decline to RM184 billion or 9.1% of GDP in 2025, from RM197.5 billion or 10.2% of GDP in 2024, in line with its fiscal consolidation plan.
Of this amount, RM106.8 billion is allocated for principal repayments, while RM76.7 billion will be used to finance the fiscal deficit in 2025. That represents 3.8% of GDP, which will be lowered to 3.5% in 2026. The 2026 fiscal deficit is also projected to be lower at RM74.6 billion.
Looking ahead, the MOF said future borrowing strategies will focus on lengthening debt maturities, reducing refinancing risks, and broadening the investor base through sustainability-linked and Islamic instruments to support Malaysia’s long-term financing needs.
In reaffirming its commitment to prudent debt management, the ministry said the government remains focused on ensuring that borrowing supports economic growth without jeopardising fiscal stability.
“Borrowing with prudence, transparency and foresight will safeguard Malaysia’s financial stability and prosperity,” the report stated.