It’s about execution

MALAYSIA’S fiscal position may be improving, but its latest Auditor-General’s Report findings point to a more stubborn problem – execution.

The government is borrowing less and running a smaller deficit, but weaknesses in loan recovery, procurement and project management continue to put public funds at risk.

The federal government’s deficit narrowed to 3.7% of gross domestic product in 2025 from 4.1% in 2024, beating the 3.8% target under Budget 2025.

Revenue rose to RM336.1bil, while new borrowings fell 8.2% to RM185.6bil.

The Auditor-General also issued an unmodified opinion on the government’s 2025 financial statements, indicating that the accounts fairly presented its financial position.

But fiscal consolidation is not yet complete. Federal government debt increased RM73.2bil, or 5.9%, to RM1.321tril, while statutory guarantees rose 9.8% to RM1.921 trillion.

Debt-service charges also climbed 6.4% to RM53.7bil, accounting for 16.2% of operating expenditure.

More troubling is the government’s ability to recover money already owed to it.

Only RM465mil, or 5%, of RM9.273bil in recoverable loan arrears was collected in 2025. The government subsequently wrote off RM578.32mil in repayment arrears involving 23 loans.

The audit also found that new arrears continued to accumulate even after some loans had been restructured, raising legitimate questions over whether restructuring is addressing underlying repayment problems or merely extending them.

Contract management provides another warning.

The previous report on defence procurement found RM162.75mil in penalties for late delivery of armoured vehicles that had yet to be collected, while RM107.54mil in maintenance, repair and spare-parts procurement was fragmented into smaller contracts.

The findings illustrate how weak enforcement and procurement controls can undermine value for money even when spending is formally accounted for.

The latest report similarly highlighted weaknesses in contractor advances, utility relocation receivables and major projects, including the Littoral Combat Ship programme.

These are ultimately execution issues: whether contracts are enforced, debts recovered and projects delivered on time and within cost.

The government therefore needs to focus less on whether audit findings have been marked “resolved” and more on whether the same weaknesses recur.

Stronger procurement enforcement, tighter credit-risk assessment, faster recovery action and clearer accountability for project delays would do more for fiscal credibility than another round of procedural assurances.

The real test of Malaysia’s fiscal reform is not simply a smaller deficit. It is whether every ringgit allocated produces the intended public benefit.