Fiscal outlook: Public sector debt higher at RM1.23 trillion

The impact of the Covid-19 pandemic and the fallout on the economy saw the government undertaking swift measures to protect lives, support businesses and strengthen the economy.

KUALA LUMPUR: Public sector debt rose to RM1.23 trillion or 85.5% of GDP as at end June 2020, due to higher Federal Government fiscal deficit to finance the Covid-19 pandemic stimulus measures.

The report said the Federal Govt debt at RM854.1bil or 69.4% of total debt, followed by non-financial public corporations (NFPCs) at 24.4% and statutory bodies 6.2%.

The NFPCs’ debt rose to RM300.4bil, which included additional funding facilities drawdown to finance capex to develop the mass rapid transit (MRT) project and investments in oil and gas sector.

Due to the uncertain economic environment in 2021, gross borrowing requirements are expected to remain substantial at around 11% of GDP.

The government will continue to finance stimulus measures during the transition phase in 2021, to fully support the economic recovery.

The emphasis will be on ensuring the well-being of the rakyat, protecting the businesses and revitalising economic activities.

Emphasis will be on prudent debt management strategies over the medium term while adhering to the stipulated debt rules.

The government will focus on ringgit-denominated issuance, leveraging on the ample domestic liquidity while reducing cost and minimise forex risk exposure.

The impact of the Covid-19 pandemic and the fallout on the economy saw the government undertaking swift measures to protect lives, support businesses and strengthen the economy.

The increase in borrowing needs, the Federal Government debt is projected to increase to around 61% of GDP, with the statutory debt to remain around 58% in 2021.