This article first appeared in The Edge Malaysia Weekly on November 2, 2026 - November 8, 2026
MALAYSIA adheres to clear governance rules and remains on track to reduce its fiscal deficit to 3% of gross domestic product (GDP) over the medium term, says Finance Minister II Datuk Seri Amir Hamzah Azizan (pictured) when asked about the transfer of net premiums from the issuance of government debt paper as non-tax revenue.
Putrajaya pencilled in “net premium from issuance of government financial instruments” of RM2 billion in Budget 2027, bolstering non-tax revenue, according to documents accompanying the recent tabling of Budget 2027 on Oct 9.
The revised Budget 2026, meanwhile, saw “net premium from issuance of government financial instruments” pencilled in at RM8 billion — the highest annual figure since 2020 — following an upward revision from RM5.5 billion when Budget 2026 was tabled in October 2025. (See accompanying story: “When cash basis accounting allows net bond premiums to lift investment revenue”.)
Net premiums from the issuance of government bonds have been accounted for in the same manner since 2020, Amir Hamzah tells The Edge in a post-Budget 2027 interview. (See interview in the Oct 26, 2026 issue of The Edge Malaysia.)
Net premium arises when the government reopens auction on a securities issuance with a coupon rate higher than the prevailing market yield or bidding rate, and the securities are sold above their par value. The excess proceeds above the principal amount raised are recorded as a premium, while the principal amount is recorded in the debt account, says Amir Hamzah.
“Theoretically, if you were to issue a bond at 5% [coupon] but the market yield is 4%, effectively, you’ve issued at a premium because your coupon is higher than what the market pays,” he explains. “It is not unusual. It is the realisation of the premium that we have already earned because coupon payments that we made were higher than the actual yield in the market.”
Under the government’s cash accounting framework, Amir Hamzah says, this net premium is held in a dedicated account, and managed by the accountant-general and reported in the Federal Government Financial Statement.
“To keep the book honest,” Amir Hamzah says the financial reporting and accounting procedure are as per accountant-general and the financial statement has been audited by the auditor-general.
“There is an agreement together with the accountant-general and auditor-general and guidelines that say when we can use the premium amount to fund certain things [or bridge a fiscal deficit creep]. It is not a willy-nilly [haphazard] choice.
“Over the years, the government has accumulated surplus arising from these premium issuances, and withdrawal was made and properly recorded. To maintain proper governance and financial discipline, a policy was established [that] regulates the transfer of these proceeds into the Consolidated Revenue Account upon the approval of Cash Flow Committee,” he elaborates, noting that keeping these funds in a specific account “allows the government to offset potential discount issuances while ensuring reporting integrity”.
The transfer of these proceeds into the Consolidated Revenue Account “are permitted only when specific fiscal criteria are met, either when annual revenue receipts are projected to drop compared to budget estimates, or when the debt service charges ratio is estimated to exceed a certain threshold”.
“Once approved, these funds are recognised as part of non-tax revenue, helping the government smooth out cash flows and fund debt service charges,” Amir Hamzah adds, reiterating Malaysia’s adherence to good governance.
“The premiums can only be used under certain circumstances. There are guardrails put in to make sure it can only be used under certain circumstances.”
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