KUALA LUMPUR, Oct 11 –  The federal government is expected to raise gross borrowings of RM135.2 billion or 8.9 per cent of Gross Domestic Product (GDP) in 2019, the Ministry of Finance (MoF) said today.

Out of the RM132.5 billion, 94.5 per cent or RM127.7 billion comprises domestic borrowings, while the remaining RM7.5 billion is offshore issuance.

The gross proceeds would be utilised mainly for principal refinancing amounting to RM83.3 billion and deficit financing of RM51.8 billion, the ministry said in the Fiscal Outlook and Federal Government Revenue Estimates 2020 report released here today.

The principal repayment consists of maturing Malaysian Government Securities (MGS) of RM43.4 billion, Malaysian Government Investment Issues (MGII) amounting to RM24 billion, Treasury Bills totalling RM14 billion, Government Housing Sukuk of RM1.6 billion and offshore loans amounting to RM0.3 billion.

The MoF said the government will continue to finance its debt domestically to strengthen the capital market, especially through higher issuance of shariah-compliant instruments to further promote Malaysia as the leading hub for Islamic finance.

The need for offshore borrowings would be based on favourable cost at acceptable risks and global financial market conditions.

Concurrently, the government would also continue to reduce its debt-to-GDP ratio through the implementation of gradual fiscal consolidation efforts, it said.

In 2020, the fiscal deficit is anticipated to reduce to 3.2 per cent of GDP from 3.4 per cent in 2019 and decline further to an average of 2.8 per cent in the medium term.

As at end-June 2019, the federal government debt stood at RM799.1 billion or 52.7 per cent of GDP, below the self-imposed limit of 55 per cent.

“As an emerging economy, Malaysia has a relatively manageable level of debt and financing needs, below its stipulated limits,” said the MoF.

Going forward, the government will improve its processes and tighten procedures for a more coherent execution of effective debt management.

“These efforts will augur well to anchor positive market expectations and ensure Malaysia’s long-term debt sustainability,” it added.

-- BERNAMA