Govt pays $3.23bn in interest on foreign debt

KUALA LUMPUR: Prime Minister Anwar Ibrahim has dismissed allegations that the government is financing its spending with new debt. He explained that the nation's overall debt would persist as long as there is a fiscal deficit, which is funded through borrowing. As Finance Minister and Prime Minister, Anwar clarified that government debt is cumulative, with each year's net borrowing adding to the outstanding debt from prior years. The Madani administration inherited a debt exceeding RM1 trillion at the time of taking office.

Under the Madani government, new borrowing is allocated to fund national development projects, including education, healthcare, infrastructure, and energy supplies. To address concerns about the government's debt level, Anwar stated that annual new borrowing had decreased from RM100 billion in 2022 to RM75.6 billion in 2025. He also dismissed claims that previous administrations had managed debt more effectively, pointing out that some spending prior to 2018 was funded through off-balance-sheet arrangements, which are not reflected in direct federal debt figures.

The debt-to-GDP ratio at the end of 2017 stood at 80.3%, compared to 80.9% at the end of 2022 and 80.7% in June 2026. The federal debt-to-GDP ratio is projected to decrease from 64% this year to 63% in 2027, with the fiscal deficit expected to narrow to 3.3% of GDP by 2027, down from 6.4% in 2021. Anwar emphasized that fiscal consolidation would not compromise public welfare, as the 2027 Budget would continue to provide aid and subsidies to protect Malaysians from economic uncertainties, including RM16 billion for cash assistance, RM18 billion for civil service salary increases, and over RM40 billion in subsidy commitments.