Govt Only Borrows To Fund Fiscal Deficit, Maturing Debt - Amir Hamzah

Finance Minister II Datuk Seri Amir Hamzah Azizan said that through strict and phased fiscal consolidation, the government managed to curb the increase in the amount of net loans while reducing debt growth.

During the winding up of the Auditor General's Report (LKAN) 3/2024 on the federal government's Financial Statements in 2023 in Dewan Rakyat today, he explained that the amount of federal government loans in 2023 actually decreased to RM226.595 billion compared to RM230.949 billion in 2022.

"The fiscal deficit has been consistently reduced. The amount of net loans is expected to continue to decrease, from RM99.4 billion in 2022 to RM92.5 billion in 2023.

"This trend is expected to continue to decrease to around RM86 billion in 2024," he said.

Amir Hamzah's speech was read by Youth and Sports Minister Hannah Yeoh as Amir Hamzah suffered from throat inflammation or laryngitis. 

According to him, of the RM241.509 billion stated in the LKAN, a total of RM8.776 billion is the net premium adjusted to the Premium Settlement Account/Government Securities Discount.

Meanwhile, RM6.138 billion is a 'switch auction' transaction which is a method used by the federal government as a debt maturity managing profile to reduce refinancing risk.

"This method will not increase the total amount of loans as it only involves the exchange of debt papers with the same principal amount between the government and market players," he said.

Amir Hamzah also explained the issue of the government's financial commitment which increased by RM0.139 billion to RM285.634 billion, and the guarantee commitment which expanded by RM3.288 billion to RM227.404 billion compared to 2022.

He said all of these guarantee commitments are debt commitments of government-related companies and statutory bodies that specifically implement social obligations, especially public transport infrastructure projects.

This includes new loan issuance mainly by Malaysia Rail Link Sdn Bhd (MRL), DanaInfra Nasional Bhd and Prasarana Malaysia Bhd; government policy intervention to support and assist company finances; and supports Urusharta Jamaah Sdn Bhd's (UJSB) sukuk structure which has a zero coupon where profits will be paid at the end of the maturity period and capitalised every year.

"It needs to be explained that the increased guarantee commitment is to cover the four ongoing transport infrastructure projects, namely the Mass Rapid Transit (MRT) project, Light Rail Transit 3 (LRT3), the Sarawak Pan Borneo Expressway and the East Coast Link Rail (ECRL) in addition to covering Infrastructure operating costs to improve the national transport network system.

"This increased commitment is to implement infrastructure projects that cannot be accommodated through development spending as well as not neglecting other social projects such as the construction of schools, hospitals, federal roads, the Sabah Pan Borneo Highway project provided under development spending," he added.

Amir Hamzah said the government also ensured that the federal liability was controlled through the measures of setting the quantity value limit that needs to be complied with as stipulated in the Public Finance and Fiscal Responsibility Act 2023 (Act 850).

It also ensures that the financing rate of funds by guaranteed corporations is in a low price range; cancelling some guarantee facilities that have not yet been used from time to time; and ensure that the guaranteed corporation has the financial capacity for the purpose of repayment of funding and subsequently does not burden the government.

"These measures will also be balanced with the government's efforts to increase national income as well as the rationalisation of subsidies," he said.

The government is also determined to reduce the ratio of debt to gross domestic product (GDP) to below 60 per cent gradually in the medium term as stipulated in the Public Finance and Fiscal Responsibility Act (FRA).

-- BERNAMA