PETALING JAYA: The Congress of Unions of Employees in the Public and Civil Services has urged civil servants to practise better budgetary planning, participate in financial literacy programmes and seek professional advice before committing to long-term monetary obligations.
This comes amid concerns over rising debt among civil servants, with 106 of them having faced disciplinary action as of 2023 for bankruptcy due to excessive borrowing.
Its president Datuk Dr Adnan Mat said the disciplinary actions are intended to uphold efficiency and integrity in the public service.
“Preventive measures, such as financial awareness programmes, stricter controls on loan accessibility and financial management training, should be strengthened to reduce the risk of such incidents in the future.”
Insolvency Department data showed that between 2020 and September 2024, 3,602 civil servants were declared bankrupt, making up 14% of all new cases and showing an increase from 12% in 2020.
Adnan said the rule that limits debt commitments to 40% of net income is designed to prevent civil servants from facing financial distress but its effectiveness depends on the cost of living, number of dependents and unexpected expenses.
He said in some cases, even with compliance, civil servants struggle financially due to unaccounted expenses.
“In addition to the rule, they must adopt prudent financial management practices and carefully assess their needs before taking loans.”
He called on the government to review the loan eligibility criteria for civil servants as it could be a proactive measure to address excessive debt issues.
He said the current criteria allow civil servants to take loans based on set regulations but there are cases in which their actual financial capacity is exceeded.
“A more in-depth assessment is necessary to ensure only those who can genuinely afford repayments are granted loans. Improving financial literacy among civil servants could help them make more responsible financial decisions.”
Adnan said regular salary structure reviews and the implementation of appropriate allowances should be considered to ensure civil servants do not have to rely excessively on debt to sustain their livelihoods.
Economist and Global Labour Organisation Southeast Asia lead Prof Dr Niaz Asadullah said while civil servants enjoy job security and form a stable part of the workforce, news of rising bankruptcy among them could weaken consumer confidence and signal deeper economic vulnerabilities.
“Financial distress among civil servants could lead to lower productivity, increased absenteeism and diminished motivation. If employees are preoccupied with financial burdens, service efficiency and decision-making may suffer.
“Financial strain may lead to a rise in corruption or misconduct as individuals seek alternative means to meet their financial obligations.”
He said aside from reviewing salary structures to better reflect the cost of living, introducing alternative savings and investment schemes could help build long-term financial security, adding that financial institutions should offer systematic debt restructuring options for struggling civil servants.
“The 40% net income rule should be reviewed for flexibility in special cases to prevent financial hardship. While it promotes financial stability through ‘forced savings’, it may also have unintended economic effects.
“For lower income civil servants, the cap may limit access to credit for essentials, such as housing, education and medical needs. Over time, reduced spending power could weaken consumer demand and affect businesses.”
He warned that the 40% policy unintentionally makes lower income civil servants more financially vulnerable, especially as they already struggle with the rising cost of living.
“If they are unable to secure formal loans, they may turn to informal lenders with high interest. This would increase financial distress, so the policy should incorporate flexibility to account for different income levels and essential cost burdens.”
