Pic by Samsul Said/Bloomberg
ROBUST financing and debt management strategies have mitigated potential risks, enabling continued investment in national development despite the challenging global environment.
This was reflected in the recent performance of the ringgit and equity market.
According to Bank Negara’s Economic Outlook 2025 Report, the initiatives and strategies that have been executed have yielded results in the declining trend of new borrowings and debt growth.
The report noted that the government’s gross borrowings are expected to consolidate further after the pandemic, thus reducing from 13.6% of the gross domestic product (GDP) in 2021 to around 10% in 2025.
In 2024, the total gross borrowings are estimated to reduce to RM206bil, sourced entirely from the domestic market, with RM84.3bil allocated for deficit financing while RM121.3bil for principal repayments.
“The government financing strategy will prioritise sourcing from the domestic market, leveraging the liquidity in the debt capital market to minimise exposure to foreign exchange risk,” it stated.
However, Bank Negara said that offshore borrowing needs will be assessed based on various considerations including the global financial market conditions and the exploration of innovative sukuk structures.
Additionally, debt growth from the government has continued to demonstrate a downward trend, having reduced from 8.6% in 2023 to approximately 7.5% in 2024 and an expected 6% in 2025.
The debt-to-GDP ratio is projected to remain around 64% by the end of this year and next.
“Moving forward, the focus should be on enhancing the private sector investments which are aimed at boosting economic capacity and productivity. "The government’s commitments in prioritising fiscal reforms through sustainable revenue generation and expenditure optimisation will enable the achievement of a prudent debt level as stipulated under Act 850,” the report noted.
Furthermore, the government announced it will continue to promote transparency while demonstrating its credibility to ensure investor confidence is strongly anchored.
On the country’s external debt, the report said it increased by 6.9% to RM1.38 trillion as of the end of June 2024, mainly attributed to higher corporate offshore borrowings and non-resident deposits.
Offshore borrowings increased to RM711.9bil, for liquidity and balance sheet management, while non-resident holdings of ringgit-denominated debt securities increased to RM269.7bil.
According to the report, the country remains at the forefront of the Islamic financial market development, commanding 33.2% of the total global sukuk outstanding as at July 2024.
“The government continues to actively support the issuance of syariah compliant instruments, underscoring Malaysia’s commitments to the development of Islamic finance,” it said.
In line with this, domestic syariah compliant issuances are expected to reach 53.6% of total gross borrowings.
On top of that, the stronger demand for Malaysian government investment issues saw a significantly higher bid-to-cover ratio at 2.93 times, compared to 2.14 times for Malaysian Government Securities.
The report highlighted that the higher bidding ratio signifies a favourable acceptance for syariah compliant papers supported by a conducive Islamic finance ecosystem.
