Low recovery of federal loan arrears raises concerns over restructuring
PETALING JAYA: The Federal Government recovered only 5% of RM9.273 billion in outstanding loan arrears last year, while RM578.32 million in repayment arrears was written off, according to the Auditor-General’s Report 2/2026.
Auditor-General Datuk Seri Wan Suraya Wan Mohd Radzi said only RM465 million in arrears was successfully collected in 2025, with the low recovery rate resulting in the need for loan restructuring.
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However, new arrears continued to accumulate even after loans had been restructured, raising concerns over the effectiveness of existing recovery measures.
“The Federal Government also wrote off RM578.32 million in repayment arrears in 2025, comprising RM127.33 million in outstanding principal and RM450.99 million in interest and late-payment interest, involving 23 loans,” she said in a statement.
Wan Suraya recommended that the Finance Ministry strengthen monitoring and enforcement, tighten risk assessments and reassess the effectiveness of loan restructuring measures.
The findings came as the government’s overall financial position improved in 2025, with its revenue surplus increasing by RM2.184 billion and its deficit narrowing by RM3.878 billion compared with 2024.
The deficit-to-GDP ratio fell from 4.1% in 2024 to 3.7% in 2025, beating the 3.8% target set under Budget 2025.
Wan Suraya said the improvement provided a strong foundation for achieving the government’s medium-term target of reducing the deficit to below 3% of GDP.
Federal debt growth also slowed over the five-year period from 2021 to 2025, declining from 10.2% to 5.9%.
New federal borrowings fell by 8.2%, from RM202.248 billion in 2024 to RM185.577 billion in 2025.
Of the new borrowings, RM106.144 billion was used to repay principal on maturing loans, while RM75.560 billion was transferred to the Development Fund to finance development projects.
The Auditor-General also issued an Unmodified Opinion, accompanied by an “Other Matters” paragraph, on the Federal Government’s Financial Statements for 2025.
Wan Suraya said the statements presented a true and fair view of the government’s financial position and were supported by proper and up-to-date accounting records.
