Debt service charges for 2023 to be 7 pct higher at RM46.1 bln

KUALA LUMPUR: The debt service charges (DSC) for 2023 are estimated at RM46.1 billion or 16.1 per cent of revenue, seven per cent higher than the RM43.1 billion (15.1 per cent of revenue) anticipated for 2022 in tandem with higher financing needs for development expenditure and COVID-19 funds.

For 2022, the financing cost for domestic issuances is estimated at RM42.3 billion while the remaining RM0.8 billion is for offshore borrowings.

"Despite the strengthening of the US dollar, the impact to the external financing cost is minimal given the low composition of foreign currency debt," the Finance Ministry (MoF) said in the 2023 Fiscal Outlook and Federal Government Revenue Estimates report released today.

The weighted average yield for outstanding domestic debt as at end-lune 2022 remained stable at 3.968 per cent (2021: 3.960 per cent), despite the higher global interest rate environment.

It said the composition of long-term instruments with remaining maturity above 10 years has slightly increased to 32.6 per cent of the total debt as at end-June 2022 (2021: 31.2 per cent).

This is in line with the debt management strategy to minimise refinancing risk by spreading the maturity profile. Consequently, the debt maturity profile for the year is expected to remain favourable with the weighted average time to maturity projected to stretch to 9.1 years (2021: 8.7 years).

Banks' holding of govt debt up 35.1 pct amid BNM temporary flexibility

As at end-June 2022, the share of resident and non-resident holdings registered at 74.7 per cent and 25.3 per cent of total federal government debt, respectively.

Resident investors increased their holdings to RM780.2 billion, mainly consisting of large and long-term institutions, particularly the Employees Provident Fund (24.1 per cent), insurance companies (4.6 per cent) and Retirement Fund (Incorporated) (2.9 per cent).

Meanwhile, banking institutions' holdings grew to 35.1 per cent from 33.5 per cent in 2021 attributable to Bank Negara Malaysia's efforts in providing temporary flexibility for banking institutions to take into account Malaysian government securities (MGS) and Malaysian Government Investment Issue (MGII) as part of statutory reserve requirement compliance.

Other resident holders also include development financial institutions with holdings of 2.1 per cent and others at 5.9 per cent.

Meanwhile, non-resident holdings reduced slightly to RM264.8 billion (2021: RM267.3 billion).

Long-term institutions, such as pension funds, insurance companies as well as central bank

and sovereigns, cumulatively held a sizeable share at 12.5 per cent of the total federal government debt, while fund managers accounted for 8.8 per cent.

The balance was held by banking institutions with 3.4 per cent holdings and other non-residents

at 0.6 per cent.

Accordingly, non-resident holdings in MGS and MGII also reduced to 45.7 per cent of the total outstanding of these instruments (2021: 49.9 per cent), reflecting net foreign outflows during the period due to the aggressive pace on the normalisation of the global interest rates.

-- BERNAMA