NST Leader: Stop treating government loans like grants

The government is making viability assessments mandatory before any new federal loans are approved. This is a welcome prudential move aimed at correcting a longstanding weakness in public lending.

The 2026 Auditor-General's Report had uncovered that only RM465 million, or five per cent, of RM9.27 billion in outstanding recoverable loans was collected in 2025.

Deputy Finance Minister Liew Chin Tong revealed in Parliament that RM578.32 million in repayment arrears for 23 loans were written off during the year.

This is precisely the sort of grim lesson the auditor-general's findings ought to elicit: stop treating loan approvals as the end of the process and the repayment as someone else's problems later.

We are talking public money being disbursed as federal loans here. The government has a duty and responsibility to ensure that money loaned out today does not become tomorrow's multi-billion-ringgit repayment headache.

Viability assessments for fresh loans need to be conducted before any approval is given and they ought to be done by independent parties and not by the very agency seeking any loan.

Rigorous stress tests should be standard operating procedure to ascertain what happens if revenue projections fall short, costs rise, interest rates change or projects in question are delayed.

Borrowers ought to be given clearly defined repayment milestones with early interventions built in when repayments are missed. Any loan restructuring should trigger a fresh viability assessment instead of earning an automatic repayment extension.

Since public money is involved, there must also be greater transparency about federal loans: how much is outstanding, which borrowers are in arrears, the frequency of loan restructuring and recovery action taken.

Ministries or agencies extending loans must clearly distinguish between commercial projects and projects serving a public or social obligation.

The latter ought not be dressed up and passed up as qualifying for loans simply to get around any lack of budgetary appetite for extending grants. Strict and very narrow criteria must be applied for loans for commercial projects by government and government-linked entities.

Any assessment for such projects ought to provide satisfactory answers as to why a government loan is required and why commercial loans may or may not be obtained instead.

Indeed, gone should be the day when the government extends loans for commercially unproven and non-viable projects.

The extent of delayed or non-recoverable payments of government-approved loans raises a host of related issues, foremost of which is the resources and manpower needed by the government in the loan-recovery process — up to and including legal action, as the deputy minister noted — before some, maybe most, of such loans are ultimately written off.

Far better, perhaps, for the government to extend either full or partial grants for worthy projects and gradually phase out the business of government extending loans for projects.