Malaysia raises $1.5 bn via dollar sukuk as fuel subsidies and legacy debts strain budget

Malaysia's Anwar Ibrahim government issued its first dollar‑denominated Islamic bond (sukuk) in five years, raising about $1.5 billion (USD 850 million due 2032 at 4.612% and USD 650 million due 2036 at 4.949%). The issue was 4.7 times oversubscribed, allowing the tightest spread ever for a Malaysian global sukuk.

Proceeds are intended to fund infrastructure projects and refinance existing obligations, while the government confronts a sharply rising fuel‑subsidy bill. Deputy Finance Minister Liew Chin‑Tong warned the subsidy cost could reach RM40‑45 billion for the year, driven by higher oil prices linked to the Iran‑Israel conflict and disruptions in the Strait of Hormuz.

In a campaign speech, Prime Minister Anwar Ibrahim also highlighted inherited liabilities, noting that the pilgrim fund Tabung Haji carries about RM10 billion of debt and the Federal Land Development Authority (Felda) another RM10 billion, requiring roughly RM1 billion of annual servicing. He defended the subsidies and targeted aid programmes as part of the government's broader fiscal strategy.