In this guide to Malaysia’s National Debt, we discuss the amount of the debt, who manages it, the country’s credit limit, and who buys its debt.
The National Debt Of Malaysia
Malaysia’s national debt is the sum of all money owed by the central government of Malaysia through the issue of debt instruments.
Obligations that are not represented by bonds or bills, such as pension obligations are not included in the national debt figure and neither are the debts accumulated by the states of Malaysia.
What’s Included in Malaysia’s Debt Number?
The table below explains what is included in the national debt figure and what isn’t:
|Malaysian Government Obligation||Government Department||Included in National Debt?|
|Government-issued bonds||Ministry of Finance||✅|
|Short-term debt instruments||Ministry of Finance||✅|
|National bank guarantee scheme||Ministry of Finance||❌|
|National pension obligations||Employees Provident Fund||❌|
|Civil Service pension obligations||All||❌|
|Accounts payable (unpaid bills)||All||❌|
|State government debt||–||❌|
National Pension Obligations
The compulsory national pension scheme of Malaysia is called the Employees Provident Fund. It is managed by the Ministry of Finance, but for accounting purposes, it is regarded as an independent entity and its assets and liabilities are not included on the nation’s balance sheet.
Government Guarantees to Private Companies
The government’s guarantees to private companies became a major political issue in Malaysia in 2018.
These guarantees were previously not counted as part of the national debt, but they are becoming an issue because default on the guaranteed loans will pass the repayment obligation to the government.
Who Manages Malaysia’s National Debt?
The central bank, Bank Negara Malaysia, states that the government, the central bank itself, and other agencies of public service have the right to raise debt through issuing bonds and notes.
All of the debt raised by the government is the responsibility of the Treasury Department of the Ministry of Finance and is included as part of the national debt.
Bank Negara Malaysia is responsible for the country’s money supply and so it would only usually raise debt to support the currency on the exchange markets. This debt does not count as part of the national debt.
The debt raised by government agencies is usually made in the form of public-private partnerships or leasing agreements. This debt is controversial in Malaysia.
What Is Malaysia’s Debt Limit?
Malaysia has a debt limit imposed by parliamentary law, expressed as a percentage of GDP. The level of the limit was raised in August 2020 to 60% of its GDP.
Problems With the Debt Limit
There are two problems with this limit: it’s self-imposed and it’s couched as public debt.
Dangers of a Self-Imposed Debt Limit
The first problem is that the debt limit was created by the government itself. Since a political party can only form a government in Malaysia if it has a majority in parliament, the limit could easily be adjusted or abolished at will.
Framing the Debt as “Public Debt”
A second problem with the debt limit is that it is framed in terms of “public debt.” Thus, the government can argue that they should be allowed to spend all the way up to the 60% limit on its own.
However, others insist that “public debt” should include all debt owed by the public sector, including Malaysian state governments and any public-sector government agencies.
Who Buys Malaysian Government Debt?
The Malaysian government only allows registered principal dealers to buy primary issues of government bonds directly from the Treasury.
However, these dealers act as market makers and either resell those bonds onto the secondary market or organize buyers for their tranche before they bid for it.
Major Buyers of Malaysian Government Bonds
According to Bank Negara Malaysia, the major buyers of Malaysian government bonds in order of activity are:
- The Employees Provident Fund (EPF)
- Pension funds
- Unit trusts
- Insurance companies
- Asset management companies
- Discount houses
- Commercial banks
Domestic institutions hold the majority of Malaysia’s government debt but overseas investors hold a small portion as well.
More Facts About Malaysia’s Debt
- You could wrap $1 bills around the Earth 744 times with the debt amount.
- If you lay $1 bills on top of each other they would make a pile 20,885 km, or 12,977 miles high.
- That's equivalent to 0.05 trips to the Moon.
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