KUALA LUMPUR, Oct 18 (Bernama) – The Federal Government's gross borrowings are expected to consolidate further post-pandemic, reducing to 10 per cent of gross domestic product (GDP) next year from 13.6 per cent in 2021.
In 2024, the total gross borrowings are estimated to reduce to RM206 billion, or 10.6 per cent of GDP, versus RM226.6 billion, which was 12.4 per cent of GDP.
The Ministry of Finance (MoF) said the government financing strategy will prioritise sourcing from the domestic market, leveraging the liquidity in the debt capital market to minimise exposure to foreign exchange risk.
However, offshore borrowing needs will be assessed based on several considerations, including the global financial market conditions and the exploration of innovative sukuk structures, MoF said in its 2025 fiscal outlook and federal government revenue estimates released here, today.
The Ministry said the initiatives and strategies executed have yielded results in the declining trend of new borrowings and debt growth and will be enhanced further under the guidance of the Fiscal Risk, Debt and Liability Committee (JRFL).
As of the end of June 2024, the overall Federal Government debt recorded RM1.227 trillion, or 63.1 per cent of GDP.
The outstanding debt for each type of instrument stood within its statutory limits as stipulated under the respective debt-related legislation.
The outstanding Malaysia Government Securities, Malaysian Government Investment Issues and Malaysian Islamic Treasury Bills amounted to 61.2 per cent of GDP, below the 65 per cent statutory limit.
Malaysian Treasury Bills and offshore borrowings also remained within the limits of RM10 billion and RM35 billion, which stood at RM6 billion and RM29.3 billion, respectively.
The Federal Government debt was primarily denominated in ringgit, accounting for 97.6 per cent of the total debt, with the remaining 2.4 per cent in foreign currencies.
Debt servicing charges increase to 15.8 per cent
The ministry said the Federal Government’s debt servicing charges (DSC) are estimated at RM50.8 billion, or 15.8 per cent of revenue, higher than 14.7 per cent or RM46.3 billion.
The higher DSC allocation is due to the continuous budget deficit, albeit at a declining rate.
The DSC is primarily allocated for interest and profit payments of domestic instruments estimated at RM50 billion, while the remaining RM0.8 billion is for offshore borrowings.
The weighted average cost of borrowing for outstanding domestic debt as of June 2024 stood at 4.119 per cent (end-2023: 4.124 per cent).
Furthermore, the fixed-rate coupon feature of government debt securities mitigates exposure to interest rate volatility for the remaining maturity period.
The borrowing strategy, among others, aims at managing refinancing risk effectively by maintaining a well-spread maturity profile.
As of June 2024, the composition of outstanding debt with remaining maturities of more than five years increased to 61.7 per cent (end-2023: 58.3 per cent).
Accordingly, the proportion of securities with remaining maturities of five years and below reduced to 38.3 per cent (end-2023: 41.7 per cent).
Consequently, the weighted average time to maturity for outstanding debt securities is estimated to extend to 9.3 years by the end of 2024 (2023: 9 years).
--BERNAMA
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