KUALA LUMPUR: The government intends to review and integrate all guarantee-related Acts into a single, comprehensive legislation to strengthen fiscal governance in keeping with global best practices and international standards.
This follows the enctment of Act 850 which serves as an enhances governance framework towards reininng in risks stemming from guarantees.
Act 850 unifies interpretation of gurantees, removing ambuiguity; mandates the publication of a guideline for managing financial guarantees; enhances transparency through fiscal risk disclosure; imposes limits on financial guarantees and risk mitigation measures which include the set-up of a sub-committee under the Fiscal Policy Committee to monitor fiscal risk, debt and liabilities.
Government guarantees are quasi-financial insturments, in which a government acts as a secondary obligor to a commitment undertaken by an entity that receives the guarantee facilities.
In Malaysia government guarantees can be categorised as institutional guarantees or financial guarantees.
Institutional guarantees refers to the government's obligation to statutory bodies. It covers cash flow obligations, debt and libaility as well as deposits and contributions to the entity.
There are six statutory bodies that fall under this category, Employees provident Fund, Retirement Fund (Incorporated), Lembaga Tabung Haji, Bank Simpanan Nasional, Lembaga Tabung Angkatan Tentera and Perbadanan Tabung Pendidikan Tinggi Nasional.
Under financial guarantees, the government may grant guarantees for loans or borrowing instruments undertaken by an entity. The government assumes the financial obligations in the event of default.
As at end of June 2024, total oustanding financial guarantees were RM407.8 billion, or 20.9 per cent of GDP.
This is compared with RM400 billion in 2023, when it was 21.9 per cent of GDP.