Malaysian civil servants spend more than half of their monthly income on repaying debt, found Bank Negara Malaysia's new study.

The central bank's Financial Stability Review for the first half of 2018 noted that after considering their monthly expenditure on basic necessities and debt obligations, civil servants are left with limited financial buffers to weather shocks.

This is more prevalent among those earning less than RM5,000 per month with only 15% of monthly income (equivalent to about RM360 to RM586) available for expenditure on discretionary items and savings. About two-thirds of civil servants earn less than RM5,000 per month.

The study also found, as at end-February 2018, total outstanding civil servants debt stood at RM236 billion, equivalent to 20% of total household debt or 17% of GDP, higher than levels observed in 2012 (18% total household debt or 15% of GDP).

Almost all civil servants (97%) have some form of borrowings, with 62% of credit obtained from non-banking financial institutions (NBFIs), compared to a national average of 18%.

About half of their borrowings (47%) are for consumption purposes (personal financing, motor vehicles, credit cards and others) -  higher than the national average of 35%.

By location, 48% of those indebted live in four key urbanised states, where costs of living are relatively higher.

Among other findings from the study include:

  • Personal financing is one of the  major contributors to debt accumulation by the civil servants, contributing 2.3 percentage points to civil servants' debt growth - about four times higher than its contribution to overall household growth.
  •  Negative financial margins (FMs) were more pronounced among civil servants in the mid- to higher-income groups, including those earning more than RM10,000 per month. This is in contrast to the observations at the national level, where those earning less than RM3,000 per month have the highest share of negative FM borrowers.
  • Overall impairment ratio of civil servants and in particular for those earning below RM5,000 per month has been gradually rising since 2012.
  • Debt-at-risk (DAR) of civil servants is estimated to be about RM24 billion, representing only 2.2% of total household debt or 10% of total civil servants’ debt. Across income groups, the bulk of the DAR is from the RM3,000-5,000 group, accounting for 42% of total DAR.
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Infographics / Bank Negara Malaysia Photo / 123RF