Finance Minister clarifies all federal loans are for national development, not operating expenses, with debt levels remaining below statutory limits.
KUALA LUMPUR: The government has stressed that federal loans are exclusively for development purposes rather than covering operating expenses.
Finance Minister II Datuk Seri Amir Hamzah Azizan confirmed that loans for current operating expenses have never occurred in Malaysia’s financial management.
He explained that every loan is strategically made to develop the country’s future through national development spending.
Malaysia has maintained continuous deficit spending since 1998, requiring annual loans to finance fiscal deficits for development purposes.
“We need to accept the reality that the sharp increase in the national debt level began in 2020,” he told the Dewan Rakyat during the Budget 2026 policy stage debate.
Amir Hamzah said the previous government took additional loans to finance COVID-19 stimulus packages and economic recovery measures.
This resulted in federal government debt rising from RM793 billion in 2019 to RM1.079 trillion by the end of 2022.
The increase represented RM286.6 billion in additional debt over the three-year pandemic period.
The fiscal deficit rate has shown consistent improvement from 6.4% in 2021 to 4.1% in 2024.
It is projected to further decrease to 3.5% by 2026 according to current government forecasts.
Total new government borrowing has also reduced significantly to approximately RM77 billion for 2025.
This compares favorably to the RM100 billion borrowing levels recorded in both 2021 and 2022.
The debt growth rate is projected to decrease to around 6% in 2025, reflecting improved fiscal management.
The government maintains debt levels below the statutory limit of 65% of GDP as required by law.
Offshore loans of RM22.8 billion remain well below the maximum permitted level of RM35 billion.
The weighted average cost of government borrowing was recorded at 3.79% for January to August 2025.
Average maturity for the entire 2025 issuance is projected to be approximately 12.6 years.
The parliament sitting continues tomorrow for further budget discussions. – Bernama
