PETALING JAYA: Although there was an increase in the Federal Government’s statutory debt levels last year, it remained within the limit of 65% of the gross domestic product (GDP).
At the same time, the government also spent significantly more on welfare and cash assistance for the people, despite an overall decline in spending for subsidies.
Statutory debt rose to RM1.295 trillion in 2025, while the debt-to-GDP ratio increased to 63.9% from 62% in 2023. Despite the increase, the ratio remained below the statutory debt limit of 65%.
Total debt rose 5.9% to RM1.321 trillion last year, an increase of RM73.162bil from RM1.248 trillion in 2024.
At the same time, the government also managed to narrow its fiscal deficit, from 4.1% of GDP in 2024 to 3.7%.
In line with the increase in federal debt, debt service charges also rose by RM3.23bil, or 6.4%, to RM53.711bil.
Debt service charges include interest on Federal Government borrowing instruments, discounts on treasury bills, profit payments on government investment issues, and management fees on domestic and external loans.
They accounted for 16.2% of the total operating expenditure of RM330.776bil last year.
According to the Auditor-General’s Report Series 2/2026 report, the proportion of debt service charges to operating expenditure showed an increasing trend, rising from 14.1% in 2022 to 16.2% last year.
Despite these figures, the government narrowed its fiscal deficit to 3.7% last year from 4.1% in 2024, indicating an overall improvement in its financial performance.
“Overall, the Federal Government’s financial performance in 2025 improved, with the deficit declining by RM3.878bil, bringing the deficit-to-GDP ratio down to 3.7%, compared with 4.1% in 2024,” the report read.
The government also recorded an RM11.451bil increase in revenue collection, with revenue rising to RM336.069bil last year from RM324.618bil in 2024.
“Operating expenditure in 2025 amounted to RM330.776bil, resulting in a revenue surplus of RM5.293bil, an increase of RM2.184bil compared to the RM3.109bil reported in 2024,” the report read.
The Development Fund’s deficit balance fell by RM1.118bil, or 10.6%, to RM9.420bil last year, from RM10.538bil in 2024.
Borrowings also decreased by 8.2% in 2025, with new borrowings amounting to RM185.577bil, a decrease of RM16.671bil from RM202.248bil in 2024.
The government also received RM39.547bil in dividends, which was an increase of RM535mil, or 1.4%, from RM39.012bil in 2024.
Petronas, which paid RM32bil, was the largest contributor, while the sovereign wealth fund, Khazanah Nasional Bhd, doubled its dividend from RM1bil to RM2bil.
Government expenditure on social welfare and direct assistance surged by over 380% in 2025, despite overall subsidy spending declining by 40.1% during the same period.
Total subsidy spending fell to RM23.428bil in 2025 from RM39.096bil in 2024, largely driven by a sharp decline in petroleum subsidies.
Petroleum subsidy spending dropped by RM15.793bil to RM19.114bil in 2025, down from RM34.907bil the previous year.
“The reduction in subsidy expenditure was attributed, among other factors, to lower global crude oil prices, the targeted diesel subsidy initiative introduced in June 2024, and the targeted petrol subsidy initiative implemented in September 2025,” said the report tabled in the Dewan Rakyat yesterday.
Global crude oil prices averaged US$69.05 (RM282.25) per barrel in 2025, compared to US$80.82 (RM330.34) per barrel in 2024.
Petroleum subsidies cover petrol, diesel, and liquefied petroleum gas (LPG).
In contrast, government spending on social welfare grants and cash assistance for individuals and families rocketed to RM20.364bil in 2025 from RM4.235bil in 2024, an increase of RM16.129bil, or 380.8%.
The report noted that the steep rise was primarily driven by disbursements under Sumbangan Asas Rahmah (Sara), Sumbangan Tunai Rahmah (STR), the Budi Madani subsidy assistance programme and related STR operational costs.
