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

Deputy Finance Minister Liew Chin Tong revealed that the federal government's outstanding loan arrears reached RM8.08 billion by the end of 2025, with companies accounting for 62% of the borrowers and state governments comprising 32%. The arrears primarily stemmed from loans allocated for essential public infrastructure projects such as water supply, sewerage, affordable housing, and public transportation.

The arrears were calculated at RM5.709 billion for outstanding principal and RM2.375 billion for interest and late-payment interest, resulting in an arrears rate of 15.67%. This figure is deemed manageable, having decreased from the 21% average between 2020 and 2022. Liew emphasized that the government would bolster borrowers' repayment abilities by restructuring loans based on each party's financial capacity, current debt levels, and projected cash flows.

This approach aimed to enable borrowers to fulfill their obligations by extending repayment periods without compromising service delivery. The government would consider loan write-offs only after exhausting all recovery efforts, including legal action, against insolvent companies, as determined by the Companies Commission of Malaysia.

Loan interest would be the sole candidate for write-offs, and the assessment model now mandates a feasibility evaluation before granting loans. Project financing would be allocated according to each borrower's repayment capacity, with any shortfall proposed as a grant.