Kuala Lumpur (VNA) – Malaysia’s sizable national debt does not pose a threat to the country’s long-term prosperity, thanks to its strong economic fundamentals and prudent fiscal management, according to economists.
According to Dr. Goh Lim Thye, a lecturer at the Faculty of Economics, University of Malaya, Malaysia’s public debt stood at 1.22 trillion MYR (290 billion USD) as of April 2024, equivalent to 63% of its Gross Domestic Product (GDP). However, this level is not inherently risky.
Dr. Goh noted that sustainability should focus not solely on debt size, but on the country’s ability to service debt without hampering economic growth or causing social instability. Malaysia maintains a diversified economy, solid fiscal capacity, and access to both domestic and international capital markets. The nation continues to receive positive assessments from global investors for its financial stability.
The Malaysian government is pushing forward key reforms, notably the enactment of the Fiscal Responsibility Act (FRA), which has been well received by the International Monetary Fund (IMF). The IMF also noted that current policies support growth, ensure social protection, and uphold macroeconomic and financial stability. The country is also well positioned to carry out broader structural reforms in areas such as income growth, digitalisation, governance, and climate response.
Imran Yusof, Head of Research at MIDF Amanah Investment Bank, shared this view, stating that the government’s financial reforms are laying a stronger foundation for effective debt management and fiscal consolidation. The budget deficit narrowed from 5% of GDP in 2023 to 4.1% in 2024, beating the 4.3% target. It is expected to decline further to 3.8% in 2025.
New government borrowings have also dropped, reaching 75 billion MYR in 2024, compared to 93 billion MYR in 2023 and 100 billion MYR in 2022. Experts suggested that attention should be paid to the debt-to-GDP ratio rather than total debt, as the deficit stems mainly from long-term development spending, which is considered manageable if economic growth continues.
Malaysia’s current debt levels are partly attributed to large-scale spending during the COVID-19 pandemic. While some of these obligations have been settled, the economy still faces residual fiscal impacts.
Dr. Goh emphasised that the key challenge for Malaysia is to strengthen its resilience, and the government is making steady progress in that direction./.
