By Anas Abu Hassan & K Naveen Prabu
KUALA LUMPUR, Oct 10 (Bernama) -- The federal government’s debt servicing charges (DSC) are projected to increase by 7.6 per cent to RM54.3 billion in 2025, accounting for 16.3 per cent of total revenue compared to a 9.0 per cent increase of RM50.5 billion or 15.6 per cent in 2024.
The Ministry of Finance (MoF) said the slower growth of DSC reflects the government's commitment to narrowing the fiscal deficit from 4.1 per cent in 2024 to 3.8 per cent in 2025.
The bulk of DSC, at approximately RM53.5 billion, is allocated for domestic instruments’ interest and profit payments, while the remaining RM0.8 billion is for servicing offshore borrowings.
"From a cost-efficiency perspective, the weighted average cost of borrowing for outstanding domestic debt stood at 4.11 per cent as at end-June 2025 (end-2024: 4.12 per cent).
"The predominance of fixed-rate coupon structures within government securities continues to insulate the debt portfolio from short-term interest rate fluctuations throughout their remaining tenures," the ministry said in its 2026 Fiscal Outlook and Federal Government Revenue Estimates report released today.
Nevertheless, the MoF said the marginal decrease in the weighted average cost of borrowing compared to the previous year has helped contain DSC’s growth.
Federal Government’s gross borrowing to decline to RM184 billion
According to the report, the federal government’s gross borrowings are projected to decline further to RM184 billion or 9.1 per cent of gross domestic product (GDP) in 2025 against RM197.5 billion or 10.2 per cent of GDP last year, sourced entirely from the domestic capital market, in line with fiscal consolidation efforts.
Of this, RM106.8 billion is allocated for principal repayments, while RM76.7 billion will be utilised for deficit financing.
Principal repayments comprise maturing Malaysian Government Securities (MGS) amounting to RM46.5 billion, Malaysian Government Investment Issues (MGII) of RM37 billion and Malaysian Treasury Bills (MTB) totalling RM5 billion.
Additionally, the Malaysian Islamic Treasury Bills (MITB) amount to RM13.5 billion and the offshore redemption is worth RM4.8 billion, including US$1 billion global sukuk.
In 2025, total issuances of MGS and MGII are projected at RM82.5 billion and RM88 billion, accounting for 44.9 per cent and 47.8 per cent of total annual gross borrowings, respectively.
Meanwhile, issuances of MTB and MITB are estimated to decline to RM4.5 billion and RM9 billion or 2.4 per cent and 4.9 per cent, respectively.
According to the report, the MoF said that as of the end of June 2025, the federal government’s debt stood at RM1.304 trillion, equivalent to 64.7 per cent of GDP.
“Of this, 98.3 per cent comprised domestic debt, while offshore borrowings reduced to 1.7 per cent (1H 2024: 2.4 per cent) following the redemption of US$1 billion global sukuk in April 2025,” it said.
Meanwhile, the report noted that Malaysia’s external debt grew by 3.9 per cent to RM1.403 trillion, equivalent to 69.6 per cent of GDP as at end-June 2025 (end-2024: RM1.350 trillion; 69.9 per cent of GDP).
“The increase was driven by stronger non-resident participation in government domestic debt securities as well as higher net issuances of bonds and notes abroad by public corporations,” the MoF said.
In addition, Malaysia's public sector debt rose by 4.2 per cent to RM1.730 trillion, equivalent to 85.8 per cent of GDP during the same period (end-2024: RM1.660 trillion; 86 per cent of GDP).
The increase was primarily driven by higher federal government borrowings, which accounted for 75.4 per cent of total public sector debt.
-- BERNAMA
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