Public sector debt swells to RM1.35t due to Covid-19 measures

 

Public sector debt increased to RM1.35 trillion or 89.5 percent to gross domestic product (GDP) as at end-June 2021, mainly contributed by higher federal government debt resulting from borrowings to finance deficit, Covid-19 assistance and stimulus packages during the year.

In 2020, it was RM1.25 trillion or 88.6 percent of GDP.

The federal government debt remains the largest component with a share of 70.7 percent of the total, followed by non-financial public corporations (NFPCs) (22.9 percent) and statutory bodies guaranteed debts (6.4 percent), the 2022 Fiscal Outlook and federal government revenue estimates released by the Finance Ministry (MoF) today revealed.

Public sector debt comprises outstanding debt obligations of the federal government, state governments, NFPCs, and sovereign-guaranteed debts of statutory bodies.

The report said the net increase in NFPCs debt to RM309.9 billion was attributed to the loan drawdown for ongoing infrastructure projects, as well as issuances of bonds abroad by public corporations.

In addition, the statutory bodies' debt increased to RM86.7 billion due to additional guaranteed loans raised by the Federal Land Development Authority (Felda) and Public Sector Home Financing Board (LPPSA) for their investment and refinancing purposes.

Federal government debt to reach 66pct of GDP in 2022

The government will continue its expansionary fiscal policy in Budget 2022 to ensure the people's wellbeing, protect business continuity and revitalise the economy.

In addition, the Twelfth Malaysia Plan (12MP) 2021-2025, with a development expenditure ceiling of RM400 billion, is expected to increase federal government borrowings.

As such, gross financing requirements, including additional allocation for the Covid-19 Fund, are expected to remain sizeable at about 12 percent to GDP.

The federal government’s overall debt is projected to reach 66 percent to GDP, while its statutory debt at 63.4 percent by the end of 2022, lower than the new debt threshold of 65 percent to GDP as approved by Parliament.

- Bernama