economy

Goverment's whopping RM407.8b financial guarantee bill

KUALA LUMPUR: As at end-June 2024, the government had a whopping RM407.8 billion outstanding financial guarantee bill.

This is the amount of money the government will have to fork out in the event the companies with the borrowings default.

 Guarantees for GLCs and statutory bodies

Financial guarantess issued under Act 96 are only issued to government linked companies (GLCs) and statutory bodies to finance projects related to public transportation, strategic investments as well as education and civil servants' housing loans.

These type of projects and programmes, although financially feasible, are not commercially viable without some form of government support due to policy intervention, high cost and lengthy gestation period.

As at end-June 2024, total oustanding guarantees under this Act amounted to RM330.8 billion or 17 per cent of GDP, which covered 26 entities.

Infrastructure projects remained the largest recipient at 58.2 per cent of total oustanding guarantees issued, mainly fir the prupose of executing  public transportation projects such as the Mass Rapid Transit (MRT), East Coast Rail Link (ECRL) and Light Rail Transit 3 (LRT3) as well as highways.

The second largest segment is services at 29 per cent, mainly for education and civil servant's home financing. The remaining segments include utilities (5 per cent), investment holdings (4.5 per cent), plantations (2.1 per cent) and financial (1.2 pe rcent).

The 10 largest recipients represent more than 85 per cent of total outstanding guarantees issued, Prasarana Malaysia Bhd, Projek lebuhraya Usahasama Bhd, Federal Land Development Authority, Pengurusan Air SPV bhd, Suria Strategic Energy Resources Sdn BHd and Jambatan kedua Sdn Bhd.

The 10 are DanaInfra Nasional Bhd, Malaysia Rail Link Sdn Bhd, Lembaga Pembiayaan Perumahan Sektow Awam, Perbadanan Tabung Oendidikan Tinggi nasional

Additionally, 88.1 per cent of Act 96 guarantees are denominated in ringgit thus minimising currency risk exposure to the government.

 Guarantees for corporate restructuring, temporary financial assistance and strategic investments

The second component of financial guarantees consists of undertaking and support as as well guarantee schemes issued under the aministration of Act 61.

These undertakings and schemes are for specific purposes such as corporate restructuring, temporary financial assistance and also strategic investments.

As at end June 2024, the oustanding exposure from undertakings and supports stood at RM30.1 billion or 1.5 per cent of GDP, with Urusharta Jamaah Sdn Bhd being the highest recipient representing 77.3 per cent of total exposure.

Meanwhile, guarantee schemes are deployed by the government to support implementation of specific initiatives aimed at promoting economic growth and improving the well-being of the rakyat.

Currently there are three main gurantee schemes namely scheme for SMEs and businesses under Syarikat Jaminan Pinjaman Perniagaan Bhd (SJPP), scheme for house buyers under Syarikat Jaminan Kredit Perumahan Bhd (SJKP), and scheme for promoting green financing scheme (GTFS).

SJPP was initiated in 2009 under tht second stimulus package to facilitate SMEs in obtaining financing from commercial financial institutions.

SJKP was established under Budget 2008 to provide guarantee for financing facilities on home purchase for those under fixed salary.

GTFS was introduced in 2010 in line with the launching of the National green Technology Policy to promote green investments through better access and lower cost to financing.

As of end-June 2024, the total outsanding exposure from these schemes amounted to RM46.9 billion, representing 2.4 per cent of GDP. 

 

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