PANDAN MP Datuk Seri Rafizi Ramli has warned that Malaysia’s growing debt servicing burden is overtaking social spending and could undermine fiscal reforms, even as the government claims success in revenue recovery and subsidy rationalisation.
Speaking during the parliamentary debate on Budget 2026, Rafizi cautioned that federal revenue collection is falling behind targets, while interest payments on national debt continue to rise sharply, threatening Malaysia’s long-term fiscal stability.
“The credibility of the Budget 2026 projections depends entirely on how 2025 performs,” he said. “Yet, the government now expects a shortfall of RM5.6 billion in revenue this year compared to its own projection of RM340 billion.”
The for Minister of Economy pointed out that even with RM15.5 billion reportedly recovered through anti-corruption efforts and penalties over two years, revenue collections have not kept pace.
“It raises the question of whether the government’s growth assumption of 4 to 4.5 per cent for 2026 is realistic, especially when 2025 may only register 4.2 per cent — or lower,” he added.
He added while operating expenditure is forecast to increase by RM6 billion in 2026, debt servicing alone will rise by RM4 billion — accounting for two-thirds of the additional spending.
“In 2026, the government will spend RM58.3 billion on interest payments, compared to RM54.3 billion this year,” he said. “For every additional ringgit spent on operations, 67 sen will go towards servicing debt.”
At the same time, social assistance and subsidy allocations are set to be reduced by RM8 billion to RM49 billion — a move the MP said was deeply concerning.
“For every ringgit spent between debt interest and social support, 54 sen is now going to pay interest, while only 46 sen is spent on helping people cope with the cost of living,” he said.
“On a per capita basis, each Malaysian is effectively paying RM1,822 in debt interest, but receiving RM1,531 in social support.”
Describing the national debt as the “greatest threat” to Malaysia’s future prosperity, he revealed that federal debt now stands at RM1.3 trillion or 64.7 per cent of GDP — just below the statutory ceiling of 65 per cent.
Rafizi warned that any economic shock, such as slower-than-expected growth or a spike in commodity prices, could push Malaysia beyond this threshold.
Moreover, he flagged a growing risk from off-balance-sheet liabilities — government guarantees for state agencies and public-private partnerships — which reached RM332.8 billion or 17.2 per cent of GDP as of 2024.
“These guarantees are often linked to infrastructure projects that cannot secure financing on commercial merit alone. The likelihood that these will become government liabilities is very real,” he said.
Among the largest exposures are RM85 billion for DanaInfra, RM50 billion for the East Coast Rail Link (ECRL), RM42 billion for Prasarana and RM41 billion for the National Higher Education Fund (PTPTN).
When combined, these liabilities and direct federal debt amount to 81.9 per cent of GDP — far above the government’s headline figure, he added.
Despite the Finance Ministry’s repeated assertions that debt is under control, the MP noted that interest payments have increased by RM17.8 billion between 2022 and 2026 — effectively cancelling out RM18 billion in subsidy savings over the same period.
“In plain terms, every ringgit saved from subsidy reform has gone into paying interest. Not a sen has been redirected into improving the people’s lives,” he said.
Calling for urgent fiscal reform, he criticised the opaque handling of national debt and called for Parliament to play a greater role in debt oversight.
“Debt issuance and planning must not remain the exclusive purview of the Finance Ministry. Parliament, and particularly the Finance and Economic Select Committee, must exercise greater scrutiny,” Rafizi said.
He argued that the government’s incrementalist approach may preserve political capital but does little to address the structural risks. “If this continues, the current administration may end its term with debt levels still dangerously close to, or even breaching, the 65 per cent limit.”
“If we can spend months debating how much aid to give the rakyat, we must also subject our debt plans to the same level of transparency. Otherwise, our fiscal reforms will be in vain,” he added. -October 13, 2025
