Malaysian public debt goes over the 65% GDP threshold

Murray Hunter


Malaysian public debt goes over the 65% GDP threshold


May 19, 2025





Data released by Bank Negara Malaysia (BNM) last Friday cites the debt-to-GDP ratio has grown to 65.5%, surpassing the statutory debt ceiling of 65%. Malaysia’s direct public debt now stands at RM 1.277 trillion at the end of the first quarter of 2025.

This brings the concern that economic growth of 4.4% in the first quarter 2025 is being partly driven by increasing debt, due to higher government services.

The public sector debt to GDP ratio has grown from 31.9% of GDP in 1997 to 65.5% in the first quarter 2025. This is more than 5.0% higher than when the ratio was 60.3% during the Covid-19 spending bubble.

The government hasn’t decreased spending after the Covid-19 period when extraordinary payments were made to keep the economy afloat and assist those in need, its continually grown since. The government borrowed RM 19 billion during April and May to date, bringing the expectation public debt may go about RM 1.4 trillion by June.

Rather than the government consolidating debt to bring the budget to balance or surplus, government borrowing, meaning deficit growth is acerating quicker than previously.

Fiscal discipline is needed to shore up investor confidence. This make increase the cost of borrowing in the next 12 months, if international credit agencies become more concerned.

If government spending continues at the same rate, further escalation of the budget deficit will occur and public debt will continue to rise. This will force the government to consider raising taxes to compensate.