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Malaysia’s Federal Debt Climbs to RM1.304 Trillion; Social Spending Still Safeguarded

By Ganesh A/L Subramaniam2 min read

Kuala Lumpur, 27 August 2025 — Malaysia’s federal debt has increased to RM1.304 trillion, equivalent to 63.9% of GDP, as of the end of June 2025. This marks a rise from RM1.248 trillion, or 64.6% of GDP, recorded at the close of 2024, according to Finance Minister II Senator Datuk Seri Amir Hamzah Azizan in the Dewan Negara today.

This uptick stems from continued borrowing to bridge the fiscal deficit and support development programmes. Substantial liabilities, including government guarantees and other obligations, currently total RM384.6 billion.

In a more positive fiscal note, new borrowing has declined—from RM99.4 billion in 2022 to RM76.8 billion in 2024. Concurrently, the fiscal deficit narrowed from 5.5% of GDP in 2022 to 4.1% in 2024, with Budget 2025 aiming for an additional decline to 3.8%.

Despite austerity efforts, the government continues to prioritise social welfare. Budget allocations include RM15 billion for direct cash aid via the Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) schemes, RM2.9 billion through the Social Welfare Department, and RM1 billion in essential subsidies.

Moreover, essential services such as education, healthcare, and housing remain financially protected. Budget 2025 earmarks RM86 billion for education, RM45.7 billion for health, and RM3.8 billion for housing, alongside enhancements to welfare aid and school infrastructure.

Looking ahead, the Medium-Term Revenue Strategy (MTRS) will underpin further fiscal reform. Measures include expanding the Sales and Service Tax (SST) on bespoke imports and selected commercial services, leveraging AI-enabled customs scanners, expanding compliance audits, and rolling out e‑invoicing to curtail tax leakage.

In addition, spending efficiency will be improved through targeted fuel subsidies and the rationalisation of statutory bodies. The GEAR‑uP initiative has identified RM22 billion in domestic investment opportunities that do not rely on federal funding. Labour market reforms, including a progressive wage policy and a minimum wage of RM1,700, are expected to bolster domestic income and support economic momentum.

Author

  • Ganesh specialises in Malaysia’s politics and crime, with a sharp focus on parliamentary affairs, national infrastructure, and development issues shaping the country’s future.