MALAYSIA’S fiscal position has strengthened with the federal government debt ratio declining to 63.1 per cent of gross domestic product (GDP) by the end of March 2026, as the government accelerates efforts to rein in deficits, manage borrowings and safeguard economic stability.
In a written parliamentary reply to Senator Datuk Leong Ngah Ngah in the Dewan Negara on Wednesday, the Deputy Finance Minister Liew Chin Tong said continued economic and fiscal reforms had delivered measurable progress, with the federal fiscal deficit narrowing for five consecutive years.
The deficit fell from 6.4 per cent of GDP in 2021 to 5.5 per cent in 2022, before declining further to 5.0 per cent in 2023, 4.1 per cent in 2024 and 3.7 per cent in 2025.
The government also recorded a steady reduction in new borrowings, which declined from RM100 billion in both 2021 and 2022 to RM92.6 billion in 2023, RM77 billion in 2024 and RM75.6 billion in 2025.
Liew said the growth rate of federal government debt had moderated consistently, falling from 11.4 per cent in 2021 to 10.2 per cent in 2022, 8.6 per cent in 2023, 6.4 per cent in 2024 and 5.9 per cent in 2025.
“As part of efforts to strengthen fiscal consolidation, the government remains committed to ensuring debt growth continues to remain at a lower level in 2026 compared with previous years,” he said.
“As at the end of March 2026, federal government debt stood at 63.1 per cent of GDP, down from 65.2 per cent at the end of 2025.
Liew clarified that the debt-to-GDP ratio was calculated based on the current year’s GDP, consistent with reporting methods applied in previous years.
The government also maintained that all statutory debt limits remained within approved thresholds.
Statutory debt comprising Malaysian Government Securities (MGS), Malaysian Government Investment Issues (MGII) and Malaysian Islamic Treasury Bills (MITB) stood at 61.9 per cent of GDP at the end of March 2026, remaining below the 65 per cent statutory ceiling.
Meanwhile, offshore borrowings totalled RM20.8 billion, well below the RM35 billion limit, while Malaysian Treasury Bills stood at RM4.5 billion, below the RM10 billion statutory cap.
The Deputy Minister said fiscal discipline had been further reinforced through the implementation of the Public Finance and Fiscal Responsibility Act 2023 (FRA), which sets a medium-term target of reducing the fiscal deficit to below 3 per cent of GDP and keeping debt levels below 60 per cent of GDP.
“Under the FRA, new borrowings are required to be channelled mainly towards productive development projects that generate economic benefits.
“To strengthen fiscal sustainability, the government outlined several reform measures, including gradual fiscal consolidation, optimisation of public expenditure, stronger revenue mobilisation and institutional reforms,” Liew said.
He explained these measures include targeted diesel and RON95 subsidy rationalisation to redirect savings towards programmes benefiting vulnerable groups, expanding the tax base through improvements to the Sales and Service Tax (SST), implementing e-invoicing, improving revenue collection efficiency and reducing leakages.
He highlighted that institutional reforms including the implementation of the Government Procurement Act 2025, rationalisation of agencies and statutory bodies, greater adoption of user-pay models under the Public-Private Partnership Master Plan 2030 (PIKAS 2030), the introduction of the Government Service Efficiency Commitment Act 2025 and the development of a Government-Linked Companies (SOE) Act.
Liew said stronger economic growth, supported by prudent borrowing management, would gradually lower the federal debt-to-GDP ratio over the medium term and that Malaysia’s economic fundamentals remained resilient, with preliminary estimates from the Department of Statistics Malaysia showing the economy expanded 5.8 per cent in the second quarter of 2026, compared with 5.4 per cent in the previous quarter and 5.2 per cent for the full year of 2025.
Inflation remained contained at 1.9 per cent in June 2026, while the labour market stayed stable with unemployment at around 3.0 per cent in May 2026.
Malaysia also recorded a significant improvement in global competitiveness, rising eight places to rank 15th worldwide in the IMD World Competitiveness Ranking 2026, reflecting continued confidence in the country’s economic management and macroeconomic stability. - July 29, 2026
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