Federal Government financial performance improves in 2025 — Audit report

KUALA LUMPUR: 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.

In a statement on the Auditor General's Report (LKAN) 2/2026, the National Audit Department said the deficit-to-Gross Domestic Product (GDP) ratio also declined from 4.1 per cent to 3.7 per cent last year.

"This achievement is better than the 3.8 per cent target set in the 2025 Budget.

"It lays a solid foundation for achieving the medium-term deficit target of below three per cent," the statement said.

Based on the audit conducted, the Auditor General issued an Unmodified Opinion, accompanied by an "Other Matters" paragraph, on the Federal Government's Financial Statements for the year 2025.

LKAN 2/2026, which covers the Federal Government's Financial Statements for 2025, the activities of Federal Government ministries and departments, as well as the financial statements and activities of state governments, agencies, ministries and departments, and the management of state-owned companies, was tabled in the Dewan Rakyat today.

According to the statement, the Federal Government's debt growth rate over the five years from 2021 to 2025 declined from 10.2 per cent to 5.9 per cent.

It said debt management also showed positive progress, with new borrowings decreasing by 8.2 per cent from RM202.248 billion in 2024 to RM185.577 billion last year.

The new borrowings were primarily used to repay RM106.144 billion in principal on maturing loans and to transfer RM75.560 billion to the Development Fund to finance development projects.

The key audit areas highlighted in LKAN 2/2026 included the management of recoverable loans, payments from special trust accounts, contractor advances, accounts receivable for utility relocation costs and the management of the Littoral Combat Ship (LCS) project, based on interim audits conducted up to July 2026.

The statement also said the collection of arrears for recoverable loans remained low, with only RM465 million, or five per cent, of the total RM9.273 billion collected in 2025, highlighting the need for loan restructuring.

However, new arrears continued to accumulate even after the loans had been restructured.

The Federal Government also wrote off repayment arrears totalling RM578.32 million in 2025, comprising RM127.33 million in outstanding principal and RM450.99 million in interest and late-payment interest, involving 23 loans.

"The Auditor General recommends that the Ministry of Finance strengthen monitoring and enforcement, tighten risk assessments and re-evaluate the effectiveness of loan restructuring," the statement said. — BERNAMA