NST Leader: Stop treating government loans like grants

The government has implemented mandatory viability assessments before approving new federal loans, a step intended to address a long-standing issue in public lending. However, the 2026 Auditor-General's Report revealed that only five percent of the RM9.27 billion in outstanding recoverable loans were collected in 2025. Deputy Finance Minister Liew Chin Tong highlighted that RM578.32 million in repayment arrears for 23 loans were written off during the year.

This highlights the need to treat loan approvals as just the beginning of the process, with repayment considered the responsibility of the borrower rather than the government. The government must ensure that public money disbursed as federal loans does not turn into a future repayment headache. Independent parties should conduct these assessments, not the agency seeking the loan.

Stress tests should be standard to evaluate the impact of various scenarios like lower revenue, increased costs, changing interest rates, or delays. Borrowers should have clear repayment milestones, and early interventions must be in place when repayments are missed. Loan restructuring should prompt a new viability assessment instead of automatic repayment extensions.

Greater transparency about federal loans is necessary, including the amount outstanding, borrowers in arrears, loan restructuring frequency, and recovery actions taken. Ministries or agencies granting loans should differentiate between commercial projects and those serving public or social purposes. The latter should not be mistakenly deemed eligible for loans to circumvent funding constraints.

Strict and narrow criteria should apply for loans for commercial projects by government and government-linked entities, with assessments providing clear reasons why public money is required and why commercial loans might not be an option. The government should stop extending loans for commercially unproven and non-viable projects.

The high level of delayed or uncollected payments from government-approved loans raises several related concerns, including the resources and manpower needed for loan recovery processes, including legal action. Extending full or partial grants for worthy projects and gradually reducing the practice of giving loans for projects could be a better approach.