KUALA LUMPUR, Oct 13 ― The federal government debt is projected to be around 64 per cent of gross domestic product (GDP) as at end-2024, higher than RM1.15 trillion or 61.9 per cent of GDP estimated in 2023, mainly for financing strategic development projects under the 12th Malaysia Plan.

Among the projects are the flood mitigation programme, Central Spine Road and Pan Borneo Sabah and Sarawak highways, Rapid Transit System Link (RTS Link) project between Johor Bahru and Singapore as well as the National Fiberisation and Connectivity Plan, currently known as Pelan Jalinan Digital Negara (Jendela).

In 2022, the federal government debt was 60.3 per cent of GDP at RM1.08 trillion.

As at end-August 2023, the total federal government debt stood at RM1.14 trillion or 62 per cent of GDP, largely denominated in ringgit with a share of 97.4 per cent of the total debt, while the remaining 2.6 per cent was in foreign currencies, the Ministry of Finance (MoF) said in the 2024 Fiscal Outlook and Federal Government Revenue Estimates report released today.

Federal government borrowing for 2024 to be lower, around 10 per cent of GDP

Total gross borrowings for 2023 are estimated at RM228.5 billion or 12.4 per cent of GDP, with RM93.2 billion for deficit financing and RM135.3 billion for principal repayments.

"In line with the Madani Economy framework, the government aims to restructure the economy and rebuild the country's fiscal resiliency and capacity. The government is also committed to prudent debt management in reducing debt and liability exposures as well as the need for a robust financing strategy,” said the MoF.

As a result, the federal government's gross borrowings for 2024 are estimated to be lower, around 10 per cent of GDP, given that the fiscal deficit for the year is expected to be 4.3 per cent versus 5 per cent in 2023.

"Given the sufficient liquidity and resiliency of domestic debt capital market, funding will be raised entirely onshore.”

Furthermore, efforts will be focused on ensuring a well-spread debt maturity profile by reducing the issuance of short-term instruments and their outstanding amount in managing the refinancing risk.

Debt service charges for 2024 to be 16.4 per cent of revenue ratio at RM49.8 billion

The debt service charges (DSC) for 2024 are estimated at RM49.8 billion or 16.4 per cent of revenue ratio compared with RM46.1 billion (15.4 per cent of revenue) anticipated for 2023, said the MoF.

The DSC has increased over the past few years due to higher borrowings to finance the Covid-19 fund and development expenditure, said the MoF.

In 2022, it was RM41.2 billion and 14.1 per cent of revenue ratio.

Hence, the DSC is currently the third largest component accounting for 15.4 per cent of operational expenditure, and is estimated to surge by 11.7 per cent to RM46.1 billion, the MoF said in the report released today.

"The DSC is primarily for domestic issuance estimated at RM45.3 billion, while the remaining RM0.8 billion is for offshore borrowings. In this regard, the weighted average cost of borrowing for outstanding domestic debt as at end-August 2023 was recorded at 4.095 per cent (2022: 4.031 per cent),” it said.

The weighted average time to maturity for outstanding debt securities is estimated to lengthen to 9.5 years (2022: 9.0 years) as a result of a notable shift in the composition of the medium- and long-term papers with remaining maturities of six years and above, constituting 58.3 per cent in 2023 higher than 2022 (56.3 per cent).

Conversely, the proportion of securities with remaining maturities of five years and below is reduced to 41.7 per cent from the previous year (43.7 per cent). This signifies a strategic move in managing refinancing risk towards a well-spread maturity profile, it said. ― Bernama