THE Government has set out a detailed strategy to manage its rising debt service obligations, which reached an estimated 16.3 per cent of total government revenue in 2025.
The announcement was made by Deputy Finance Minister Liew Chin Tong in response to a parliamentary question from Tan Sri Muhyiddin Yassin (Pagoh) regarding medium- and long-term debt restructuring measures.
Liew explained that the increase in debt servicing costs compared with 12.5 per cent in 2019 stems largely from substantial borrowings made during 2020–2022 to fund economic stimulus packages and recovery programmes in response to the COVID-19 pandemic.
Federal Government debt rose by RM286.6 billion over this period, representing an increase of more than 36 per cent from RM793 billion in 2019. The debt-to-GDP ratio also climbed from 52.4 per cent in 2019 to 60.2 per cent in 2022.
“Given these circumstances, prudent fiscal reforms are necessary to gradually reduce annual borrowing and the fiscal deficit, thereby lowering debt service obligations over time,” Liew stated.
He outlined that the government has successfully reduced new borrowing from RM100 billion in 2021 and 2022 to RM92 billion in 2023, RM77 billion in 2024, and approximately RM75 billion in 2025, with further reductions planned for 2026.
These measures have already borne fruit, with the debt service ratio declining from 12.3 per cent in 2023 to 9 per cent in 2024, and 6.4 per cent in 2025.
The Deputy Finance Minister elaborated on the government’s ongoing fiscal strategies, which include gradual fiscal consolidation, broadening the tax base through mechanisms such as sales and services tax (SST) expansion and e-invoicing, and optimising public expenditure through targeted subsidies and rationalisation of statutory bodies.
Borrowings are focused exclusively on projects and programmes that deliver long-term returns to the nation and its citizens.
Furthermore, financial exposure through government guarantees is capped at 25 per cent of GDP in accordance with the Fiscal Responsibility Act 850, ensuring that government liabilities remain aligned with current economic capacity.
Emphasis is placed on user-pay projects via the Public-Private Partnership Master Plan 2030, and a review of off-budget project execution is ongoing to enhance transparency and efficiency.
Liew added that responsible fiscal management, coupled with pragmatic economic policies, will drive private investment, stimulate sustainable economic growth, and strengthen Malaysia’s long-term financial resilience. - January 22, 2026
.jpeg)
