Malaysia’s RM1.09 tril Debt and Liabilities

Recently the Special Parliamentary Select Committee on Budget confirmed that outstanding government debt and liabilities stood at RM1.09 trillion. This was confirmed by the chairman of the committee Datuk Seri Mustapa Mohamed. The latest findings of the government’s debt and liabilities are in line with the accrual released by the International Monetary Fund (IMF). The government saw an increase in total debt and liabilities in 2018 as compared to 2017 due to higher government guarantees borne and federal debt.

Source: The Edge

Federal Debt rose to RM741.05 billion at end-2018 compared to RM686.84 billion the previous year. This represents 51.2% of Malaysia's gross domestic product (“GDP”) as compared to 50.1% of GDP in the previous year. The increase was attributed by higher GIIs and MGS issuances. The primary purpose of Federal debt instruments is to provide funds for development expenditure needs after taking into account the operating surplus and also to refinance maturing debt.

Federal Debt encompasses of the following:-

No.	Details	2018 Amount (RM’billion)	2017 Amount                    (RM’billion)
1.	Malaysian Government Securities (“MGS”)	380	365
2.	Malaysian Treasury Bills (“MTB”)	7	5
3.	Government Investment Issues (“GIIs”)	304	268
4.	Treasury Housing Loan Fund	28	28
5.	Offshore Borrowing	22	21
	Total Federal Debt	741	687

The table below explains the debt legislative and administrative guidelines on Federal Debt instrustments.

Based on the 2019 Budget, the Federal Government gross borrowing requirements are anticipated to be higher for deficit financing and refinancing of mature papers. Approximately a total of RM70 billion is expected to mature this year.

Government guarantees borne on the other hand saw an increase from RM102.1 billion to RM132.7 billion in 2018. The Federal Government may have to step in for some of the government guarantees borne as these projects are unable to generate sufficient revenue to repay the principal and interest of the sukuk issued.

Source: The Edge

The Federal Government will have to explore ways to manage the Federal debt and government guarantees in the coming years. One approach that the government has done this year is to tap the international bond market instead of the domestic bond market. The government issued a Samurai bond in March this year. An issuance size of 200 billion yen (approximately RM7.3 billion) was issued in March and the proceeds were used to finance infrastructure development. 

The government is looking into setting a ceiling for government guarantees on public projects. The Prime Minister mentioned last month (in his speech) that the government is looking into this approach as currently there is no limit on the amount of guarantees given by the Federal Government.

Source: Budget Info 2019, Treasury Malaysia;

What is in Malaysia’s RM1.09 tril debt by The Edge, 18^th July 2018; and

PSC confirms govt debt, liabilities at RM1.09 trillion at 2018 year-end by the Star newspaper, 17^th July 2018