Country's Financial Situation Stable; Debt at a Manageable Level

Referring to several reports on social media which are perceived as intending to mislead the public on the country's financial position and debt situation, the Ministry of Finance (MOF) would like to inform that the country's fiscal position remains strong and the Federal Government debt is at a manageable level.

MOF would like to emphasize that the important aspects of debt management are debt affordability and debt sustainability. In this regard, the Federal Government debt is clearly still under control based on the following factors:

1. Although the country has gone through a series of recessionary economic and financial crises before, the Government has always been highly disciplined and has never defaulted in servicing its interests and debts. This reflects Malaysia's reputation and capability as a debtor with a good repayment record.
   
   
2. Prudent debt management is also practised through existing laws, among others:
   
   
1. Article 98 (1) (b) of the Federal Constitution stipulates that the Government must always prioritize debt charges over other operating expenditure.
2. The External Loans Act 1963 provides that offshore borrowings should not exceed RM35 billion. As at end-June 2022, this debt amounted to RM29.4 billion.
3. The Temporary Measures for Government Financing (Coronavirus Disease 2019 (COVID-19)) (Amendment) Act 20212 stipulates that the Government’s statutory debt limit 3 should not exceed 65% of GDP4. At the end of June 2022, statutory debt accounted for 60.4% of GDP.
   
   
3. In addition, 97% of the total debt of the Federal Government is denominated in Ringgit. This reflects prudent debt management as exposure to foreign exchange risk is minimal.
   
   
4. A high level of debt does not mean that the country is at risk of bankruptcy. Various international ratings agencies such as S&P Global, Fitch and Moody’s constantly assess a country’s debt level together with other factors such as a prudent fiscal framework, sound governance and resilient external position, as well as the strength of its economy.
   
   
5. The International Monetary Fund (IMF)5 has also acknowledged that Malaysia's debt position is still at a manageable level. Recently, S&P also postulated that the Government's policy planning will support the strengthening of the country's fiscal position.

Based on these factors, MOF also refutes recent allegations by several irresponsible and malicious parties that Malaysia is about to go bankrupt, just like a particular country in South Asia. The MOF has also lodged an official complaint with the Malaysian Communications and Multimedia Commission (MCMC) on several false social media reports on the country's debt position which are seen as intending to mislead the public and could potentially affect investor confidence in Malaysia.

YB Senator Tengku Datuk Seri Utama Zafrul Tengku Abdul Aziz
Minister of Finance
14 July 2022