The Federal Government collected just RM465 million, or 5%, of the RM9.273 billion in loan arrears recorded at the end of 2024 in 2025, according to the Auditor-General’s Report No. 2/2026.
Recoverable government loan arrears stood at RM8.084 billion as at 31 December 2025, with RM5.024 billion, or 62.1%, outstanding for more than six years.
Across 190 loans involving 30 borrowers, the Auditor-General identified weaknesses in the monitoring and recovery of government lending.
Restructured loans continue to fall into arrears
Some borrowers continued to accumulate arrears even after the government restructured their loans. Some loans had been restructured between one and five times, while revised repayment periods ranged from 10 to 40 years.
A further RM16.15 million in new arrears emerged even after restructuring, according to the audit.
During 2025, the government also wrote off RM578.32 million in loan arrears, comprising RM127.33 million in outstanding principal and RM450.99 million in interest and late-payment interest.
The audit found that the write-offs followed proper procedures and received approval from the Finance Minister.
AG calls for tighter loan monitoring
Among its recommendations, the Auditor-General called on the Finance Ministry to improve monitoring and enforcement of loan repayments, including issuing demand notices promptly.
It also recommended considering legal action against borrowers who breach their agreements without reasonable justification.
The Auditor-General further called for more rigorous assessments of borrowers’ financial capacity and risk before approving new loans or restructuring existing facilities.
It also urged the Finance Ministry to assess whether restructuring arrangements are actually improving borrowers’ ability to meet their repayment obligations.
Featured image credit: Edited by Fintech News Malaysia, based on image by abuuhurera and leungchopan via Magnific
