MalaysiaFinance Ministry Faulted for Poor Loan Collection
The Auditor-General's Report Series 2/2026 reveals that the Finance Ministry collected only 5% of RM9.273bil in arrears last year, with some loans overdue for over 40 years. The report highlights the need for improved monitoring and enforcement mechanisms for loan repayments.
Global Newsflix 2 min read
The Finance Ministry has been criticized for its poor loan collection, with only RM0.465bil, or 5%, of the arrears from the previous year successfully collected in 2025. The Auditor-General's Report Series 2/2026, tabled in Parliament on October 5, shows that loan arrears outstanding for more than six years amounted to RM5.024bil, or 62.1% of total arrears of RM8.084bil.
As of the end of last year, total arrears of RM8.084bil had been outstanding for between one and 45 years, involving 30 borrowers and 190 loans. The highest amount of arrears was for loans outstanding for more than six years, totalling RM5.024bil, or 62.1% of total arrears.
The Auditor-General recommended that the ministry strengthen its monitoring and enforcement mechanisms for loan repayments by ensuring that follow-up action is taken or demand notices are issued promptly once arrears occur. The report also suggested that legal action should be considered against borrowers who fail to comply with the agreements without reasonable justification.
The loan restructuring process has also been called into question, with the report finding that new arrears amounting to RM16.15mil were recorded after loan restructuring, despite the loans having been restructured between one and five times. The repayment period for restructured loans was extended by between 10 and 40 years.
The government lost the potential to recover outstanding principal balances amounting to RM127.33mil and had to forgo interest and late-payment interest revenue amounting to RM450.99mil as a result of write-offs. The Auditor-General's report highlights the need for stricter financial capacity analyses and risk assessments before approving new loan disbursements or loan restructuring.
The Federal Government's financial performance improved in 2025, with its revenue surplus increasing by RM2.184 billion and its deficit narrowing by RM3.878 billion compared with 2024. However, the debt-to-GDP ratio rose to 65.2% in 2025.
Fuel subsidy spending plunged in 2025, while targeted welfare aid surged. The Auditor-General's report provides a detailed analysis of the government's financial performance and highlights areas for improvement.
Key facts
- The Finance Ministry collected only 5% of RM9.273bil in arrears last year.
- Loan arrears outstanding for more than six years amounted to RM5.024bil, or 62.1% of total arrears of RM8.084bil.
- The government lost the potential to recover outstanding principal balances amounting to RM127.33mil.
- The debt-to-GDP ratio rose to 65.2% in 2025.
Three perspectives
Neutral
The Auditor-General's report provides a balanced view of the government's financial performance, highlighting both improvements and areas for improvement. The report's recommendations aim to strengthen the ministry's monitoring and enforcement mechanisms for loan repayments. The government's financial performance will be closely watched in the coming year.
Positive
The improvement in the Federal Government's financial performance is a positive sign, with the revenue surplus increasing and the deficit narrowing. The surge in targeted welfare aid is also a constructive development, indicating a more effective allocation of resources.
Negative
The poor loan collection and high debt-to-GDP ratio are critical issues that need to be addressed. The government's inability to recover outstanding principal balances and the significant amount of write-offs are concerning signs of inefficiency in the loan restructuring process.
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