Kuala lumpur: Malaysia’s net borrowings are anticipated to see a slight decline in 2026 as the government intensifies its fiscal consolidation efforts under its medium-term fiscal strategy, reducing the deficit to RM74.6 billion from RM76.7 billion in 2025, CIMB Investment Bank Bhd reported.

According to BERNAMA News Agency, CIMB highlighted that the Federal Government’s statutory debt stood at 63.5% of the GDP by the end of June 2025. Projections from the Finance Ministry suggest this ratio will remain stable through 2026, staying below the statutory debt ceiling of 65%. The research note from CIMB also forecasts a slower increase in the country’s debt service charges, with a year-on-year rise of 7.6% to RM54.3 billion this year and 7.4% to RM58.3 billion in 2026, facilitated by reduced net borrowings and lower borrowing costs.

CIMB pointed to positive developments in nominal fiscal deficit consolidation for 2025-2026, which could alleviate challenges from supply headwinds in the upcoming year, particularly due to significant refinancing needs from maturing Malaysian Government Securities (MGS) and Government Investment Issues (GII). The maturities are projected at RM108.7 billion in 2026, up from RM83.5 billion in 2025. The bank expects the Finance Ministry to mitigate bond rollover risks through bond-to-bill substitution, supporting their MGS and GII supply forecast of RM173 billion to RM178 billion. This forecast marks a slight increase from RM170.5 billion in 2025, allowing flexibility for refinancing a US$1 billion global sukuk maturing in April 2026 using local currency instruments.

Separately, MBSB Investment Bank Bhd expressed that the Federal Government is likely to maintain its commitment to fiscal consolidation, as evidenced by a continuous decline in fiscal deficits from over 6% of GDP during the global pandemic in 2020-2021. MBSB Research, a division of the bank, stated confidence in the government’s target to reduce the deficit to below 3% of GDP by 2030. This ongoing deficit indicates a reliance on borrowings for financing development expenditure, while operating expenditures are expected to be covered by fiscal revenue.

MBSB Research projects that with the shrinking fiscal deficit, the gross issuance of government debts could rebound to RM191.3 billion after an estimated drop to RM184 billion this year. The anticipated higher borrowings next year are attributed to a redemption of RM116.7 billion. The net supply is forecasted to be slightly lower at RM74.5 billion for 2026, compared to an estimate of RM76.7 billion for 2025. Additionally, they predict a slight increase in the gross issuance of MGS and GII to RM177.3 billion next year from the 2025 estimate of RM170.5 billion. The outstanding government debts are expected to surpass RM1.3 trillion, potentially maintaining the debt-to-GDP ratio at 64.3%, compared to estimates of 64.9% for 2025 and 64.6% for 2024.