Govt's Collection Rate Of Loan Arrears Only At 5 Pct Or RM465 Mln In 2025 - Audit Report

KUALA LUMPUR, Oct 5 (Bernama) -- The Federal Government recorded a low collection rate of five per cent for outstanding loan arrears, with only RM465.0 million of the RM9.27 billion in arrears from the previous year successfully collected in 2025.

According to the Auditor General’s Report 2/2026 on the Federal Government’s Financial Statements for 2025, loan arrears exceeding six years amounted to RM5.02 billion, or 62.1 per cent of the total arrears of RM8.08 billion, as of Dec 31, 2025.

“The ineffective collection of outstanding loan repayments has necessitated restructuring as a recovery measure to assist borrowers in settling their repayments,” the report said.

The audit analysis found that there were fresh arrears amounting to RM16.15 million following the loan restructuring, even after the loans had been restructured between one and five times,.

The repayment period for the restructured loans was extended by between 10 and 40 years.

“As a result, the Federal Government also lost the potential to recover principal balances amounting to RM127.33 million and had to forgo interest and late-payment interest revenue amounting to RM450.99 million as a result of write-offs,” the report said.

The Auditor General’s Report also recommended that the Finance Ministry (MoF) strengthen its monitoring and enforcement mechanisms for loan repayments by ensuring that follow-up action is taken or demand notices are issued promptly when arrears occur.

It also recommended considering legal action against borrowers who fail to comply with the agreements without reasonable justification.

“In addition, stricter financial capacity analyses and risk assessments should be carried out before approving the disbursement of new loans or the restructuring of loans in order to curb the government’s exposure to the risk of losses.

“MoF is also recommended to assess the loan restructuring process to ensure that it genuinely helps to restore the borrowers’ cash flow and improve their ability to repay the loans,” the report said.

Meanwhile, the report also stated that the balance of recoverable loans involving borrowers stood at RM49.22 billion as of Dec 31, 2025, compared with RM49.62 billion in 2024, representing a decrease of RM398.0 million.

“The interest and late-payment interest balance also recorded a decrease of 13.1 per cent, or RM358.0 million, to RM2.375 billion in 2025 from RM2.733 billion in 2024.

“The reduction in recoverable loans as well as interest and late-payment interest was due to repayments and write-offs,” the report said.

Recoverable loans are loans provided by the Federal Government to six categories of borrowers: companies, state governments, statutory bodies, various agencies, cooperatives and individuals.

These loans are provided, among other purposes, to finance water supply projects, public housing and loan repayments.

-- BERNAMA