78
Domestic Market – Public Sector Issuance
Over the years, in support of its aspiration to turn Malaysia into an international ICM, the GoM
has progressively increased the percentage of government investment issues (GII) compared
to Malaysian government securities (MGS) (as described in Box 4.4). Chart 4.4 shows that as at
end-June 2017, a total of RM67.0 billion of government securities had been issued, of which
46% constituted sukuk, compared to only 27% as at end-2006.
Chart 4.4: Malaysia’s Sovereign Sukuk vs Conventional Issuance (2006-June 2017)
0.00
20.00
40.00
60.00
80.00
100.00
120.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 June 2016 June 2017
RMbillion
Sukuk issuance Conventional issuance
RM42.4
billion
46 %
RM67.0
billion
RM94.0
billion
27%
Source: Bond Pricing Agency Malaysia (BPAM)
Box 4.4: Malaysia’s GII
In 1983, the Malaysian Parliament passed the Government
Investment Act to enable the GoM to raise funds through
the issuance of non-interest-bearing certificates, known as
GII. The first GII issuance took place in July 1983. The
primary reason for the introduction of GII had been to
enable Islamic banks to hold first-class liquid
assets/instruments to meet the statutory liquidity
requirements and also for investment.
GII had first been issued based on the Shariah contract of
qard hasan (benevolent loan). Since 22 July 2014, GII
issuance has adopted the murabahah concept. As at end-
2016, the percentage of GII relative to the GoM’s
borrowings had increased to 39.6%, from only 10.0% a
decade ago - indicating the GoM’s commitment to
supporting the growth of Islamic finance.
GII
(RM
billion)
MGS
(RM
billion)
% of GII
to total
issuance
2006 19.6 174.3 10.0
2007 28.0 191.7 12.7
2008 42.5 231.8 16.6
2009 66.0 242.3 21.4
2010 81.5 261.0 23.8
2011 110.0 277.7 28.4
2012 143.5 292.1 32.9
2013 172.5 305.1 36.1
2014 185.5 329.6 36.0
2015 214.0 340.1 38.6
2016 234.5 357.4 39.6
Source: BNM
Historically, a large portion of the GoM’s budget deficit has been funded by capital-market
instruments. Hence given the larger budget deficit projected for 2017 (as depicted in Table
4.3), our analysis concludes that the GoM will remain committed to supporting the issuance of
Islamic securities to finance its budget shortfall.