Companies owe govt the most in loan arrears, followed by state govts

Malaysia's outstanding loan arrears to the federal government reached RM8.08 billion by Dec 31, 2025, according to deputy finance minister Liew Chin Tong. Companies constituted the largest group of borrowers, accounting for 62% of the defaults, with state governments following at 32%. The arrears comprised RM5.709 billion in principal and RM2.375 billion in interest and late-payment interest, with an overall arrears rate of 15.67%.

This figure represents a decline from the 21% average between 2020 and 2022. The government plans to enhance borrowers' repayment capacity through restructuring, such as extending repayment periods, without compromising service delivery. Loan write-offs would only be considered after all recovery efforts fail, specifically for insolvent companies identified by the Companies Commission of Malaysia and approved by the finance ministry's legal division.

The loan assessment model has been strengthened with mandatory feasibility assessments before approvals, with loan amounts limited based on actual repayment capacity, with the remainder proposed as a grant.