Govt seeks to contain borrowings, rebuild fiscal buffers

The Malaysian federal government's debt increased by RM58.1 billion to RM1.37 trillion by the end of June 2026, compared to RM1.32 trillion at the end of 2025, according to official figures. Finance Minister said 2027 will see efforts to curb debt growth and rebuild fiscal buffers by focusing on managing borrowing costs and reducing refinancing risks.

This approach aims to maintain affordable borrowing, manage risks, and gradually build fiscal space while directing public funds towards impactful investments. Debt-to-GDP ratio dropped to 63.1% in 2026 from 65.2% in 2025, suggesting the economy expanded faster than debt, bringing the government closer to its target of keeping the ratio below 60%.

Projections indicate net government borrowings will rise to RM78.6 billion by year-end 2026, up from RM75.6 billion in 2025. The government strategy emphasizes ringgit-denominated domestic issuances to protect against currency fluctuations, with 78.5% of the debt held by resident investors, led by the Employees Provident Fund (30.5%) and banks (28.5%).

The remaining 21.5% is owned by non-residents. The ministry's debt management strategy focuses on aligning the maturity profile and minimizing rollover risks by prioritizing medium-to-long tenure issuances amid a volatile global interest rate environment.