What proportion of new loans finances matured loan principal payments?

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A Significant Portion of New Loans Repays Principal on Matured Debts

In 2021, the Malaysian federal government allocated RM113.674 billion, representing 52.4 per cent of its total gross loans, towards servicing the principal payments of matured loans. This practice indicates a substantial reliance on new borrowing to meet existing debt obligations, with a comparatively smaller portion directed towards development initiatives.
Allocation of Gross Loans in 2021

The federal government's financial activities in 2021 saw gross loans amounting to RM217.201 billion. Of this total, over half, specifically RM113.674 billion (52.4 per cent), was earmarked for the repayment of the principal on loans that had reached maturity. This highlights a significant financial mechanism where new borrowings are primarily used to settle previous debts.
Funding for Development Expenditure

Following the allocation for matured loan principal payments, only 28.7 per cent of the RM217.201 billion in gross loans, or RM62.317 billion, was designated for the Development Fund. Further analysis reveals that out of this amount transferred to the Development Fund, only RM40.994 billion was ultimately utilised for its intended purposes. This figure represents a decrease compared to 2020, when RM37.530 billion, or 77.3 per cent of loans that year, was directed towards the Development Fund.
Context of Increased Federal Debt

The Auditor-General's report indicated that the federal government's debt had increased to RM979.814 billion in 2021, up from RM879.56 billion in 2020, constituting 63.4 per cent of the gross domestic product (GDP). The Auditor-General, Datuk Seri Nik Azman Nik Abdul Majid, explained that this rise in debt was directly linked to the RM217.201 billion in gross loans taken out. He noted that while loans have historically financed the Development Fund, the COVID-19 pandemic necessitated the use of a portion of these funds to support the economy and affected companies.
Concerns Over Interest Payments

The Public Accounts Committee (PAC) chairman, Wong Kah Woh, expressed concern that 16.3 per cent of the federal government's total revenue in 2021 was allocated to loan interest payments. This means that for every ringgit collected, 16 sen was used solely to service loan interests. While acknowledging that the increased borrowing for pandemic-related measures might be a temporary situation, the Auditor-General stressed the need for the government to implement remedies to ensure debt becomes more manageable.

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What proportion of new loans finances matured loan principal payments?

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