Reduce debt and liabilities | The star

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THE government will continue to adopt a proactive approach in monitoring its liabilities and risk exposure in order to assess and improve the level of indebtedness, while ensuring prudent management of its debts and liabilities.

Malaysia currently reports on debt and liability exposure, comprising federal government debt, pledged guarantees, 1Malaysia Development Bhd (1MDB) debt, public-private partnership (PPP) pledge, public finance initiatives (PFI) and projects under LTBP Sdn Bhd.

As of end-June 2022, the government’s total debt and liability exposure was estimated at RM1,420.4 billion, or 82.9% of gross domestic product (GDP).

On Government Guarantees (GG), the total GG outstanding amount moderated to RM307 billion or 17.9% of GDP at end-June 2022, from RM310.4 billion or 21% of GDP at end-2021 .

The slight reduction was attributed to the completion of financing terms by several GG recipients such as Pahang State Development Corp and Johor Corp, as well as the large repayment of outstanding principal by Khazanah Nasional Bhd.

However, there have been new issuances by DanaInfra Nasional Bhd for public transport projects, as well as restructuring and rehabilitation exercises by the Federal Land Development Authority.

On a segmental basis, infrastructure was the largest beneficiary of GGs (56%), followed by services (26.7%), holdings (7.6%), utilities (5.4%) and other ( 4.3%), of which the top 10 outstanding GGs constituted more than 85% of total collateral.

In terms of currency denomination, over 90% of GG was in ringgit while the remaining GG was a mix of other currencies including renminbi, yen and US dollar, minimizing the government’s foreign exchange risk exposure .

Of GG’s total outstandings, 65% were committed guarantees. At the end of June 2022, committed guarantees increased slightly to RM199.9 billion from RM197.3 billion at the end of 2021.

The increase in pledged guarantees was attributed to new financing issues by existing entities such as DanaInfra, Prasarana Malaysia Bhd and Malaysia Rail Link Sdn Bhd for ongoing transport projects.

Meanwhile, 1MDB’s outstanding debt had been reduced to RM25.9 billion at the end of June 2022 following the settlement of 1MDB Energy Ltd’s debt in May this year.

The government’s initiatives to recover 1MDB’s assets involve extensive joint investigative work, negotiations as well as the initiation of legal proceedings.

At the end of June 2022, 1MDB’s outstanding financial obligations were estimated at RM31.6 billion, comprising principal of debt of RM25.9 billion and projected interest or profit of RM5.7 billion.

Other government financial liabilities include PPP project cash commitment projections, PFI project financial obligations and LTBP financing.

As of the end of June 2022, 105 PPP projects required government financial allocation with an estimated cash commitment of RM98.4 billion.

PFI projects were initiated by the government to accelerate infrastructure development projects.

The source of funding for the PFI projects came from the Employees Provident Fund and Employees Retirement Fund (Incorporated), while the government provided a stipend for repayment of the funding.

The outstanding liabilities of PFIs at end-June 2022 were estimated at RM48.1 billion.

PBLT has collected several sukuks to finance infrastructure projects, including the construction of police stations, training centers and housing.

The outstanding debt of PBLT was estimated at RM3.2 billion at the end of June 2022.

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