RM2.1b rural road overspending triggers contractor payment delays, new project freeze

RURAL road projects have run up RM2.1 billion in spending beyond approved allocations between 2023 and 2025, prompting the government to approve an additional RM500 million and halt new project awards to contain contractor payment arrears.

Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim said the Finance Ministry had identified savings in other ministries’ development expenditure to provide the additional funding to the Rural and Regional Development Ministry (KKDW).

He said KKDW had been directed on Sept 10 to suspend the issuance of new letters of acceptance (SST) for rural road projects to prevent arrears from rising further.

“KKDW has made commitments and spent beyond the original allocations approved under annual Budgets for rural road projects over several years, resulting in arrears and delays in payments to contractors,” he said in a written parliamentary reply.

Anwar said annual allocations for rural road projects had been raised to more than RM2 billion under Budget 2026 and Budget 2027, but were still insufficient to cover contracts already awarded.

The Finance Ministry has asked KKDW to prepare funding projections through the end of this year and for 2027, based on existing contractual commitments, to determine the additional financing required.

Anwar was responding to Lim Guan Eng (PH-Bagan), who asked about action against those responsible for alleged financial procedure breaches involving RM2.1 billion in expenditure exceeding allocations from 2023 to 2025.

He said rural road projects were generally awarded through open tenders and Pre-Qualification Open Tender (TTPKT), a special procedure introduced by the Finance Ministry in 2023 to speed up project implementation.

However, the Auditor-General’s Report No. 2/2025 found that TTPKT, including its use by KKDW, had failed to achieve the government’s original objectives.

“Accordingly, the Finance Ministry has also stopped approving the use of TTPKT by KKDW for new projects,” he said. - October 20, 2026