The Fiscal Outlook 2026 noted that the debt outlook for 2026 to 2030 remains broadly manageable, within low to moderate risk parameters.
THE results of Malaysia’s debt sustainability analysis (DSA) show that the country’s debt level remains manageable and sustainable over the medium term.
Additionally, the findings indicate that Malaysia is able to finance the 13th Malaysia Plan (13MP) without jeopardising debt-to-GDP (gross domestic product) ratio, ensuring that key development priorities can be fully implemented to support resilient economic growth.
“The government will continue to implement bold fiscal reforms initiatives to provide adequate fiscal space as well as enhance effective debt management and borrowing strategies towards attaining debt sustainability in the long term,” according to the Fiscal Outlook 2026 report.
The DSA serves as a tool to assess and guide the formulation of macroeconomics and fiscal policies in the medium term, as it evaluates the government’s ability to meet current and future debt obligations under various macro-fiscal shock scenarios.
With the current global growth outlook shaped by shifting trade policies, tariff uncertainties and geopolitical tensions, the DSA provides a refreshed assessment of Malaysia’s fiscal position and long-term debt trajectory.
It also takes into account the financing needs and growth assumptions under the 13MP.
According to the Fiscal Outlook 2026, the DSA outcomes are reflected in projections of the debt-to-GDP and gross financing needs-to-GDP ratios.
Further, sensitivity analyses or stress tests enable the government to anticipate the potential impact of adverse macro-fiscal shocks on debt sustainability.
Subsequently, the government develops policy interventions to mitigate the risks and sustain market access.
Finally, beyond the macro-fiscal and stress tests, the DSA also undertakes a comprehensive risk assessment of the current debt profile of a country.
The Fiscal Outlook 2026 noted that the debt outlook for 2026 to 2030 remains broadly manageable, within low to moderate risk parameters.
However, it cautions of heightened risks from external financing requirements, and a sustained moderate risk from contingent liabilities.
This emphasises the importance of enhancing fiscal buffers, improving the transparency of liability commitments, and strengthening the resilience of the domestic capital markets.
“Continued implementation of fiscal reforms and sound debt management practices are essential to sustain stability and gradually shift risks towards the lower end of the spectrum,” it said.
