When prices rise, where does the lost purchasing power go?
Malaysian inflation of 1.78% in the year to 2026-07 applied to federal government debt of RM1,320.8 billion and household debt of RM1,413.5 billion shows which side of the balance sheet gains, and where the calculation stops.
Prices rise, so cash buys less each year. The next question is where the lost purchasing power goes. This note computes the other side of the equation from Malaysian official statistics, and states where the calculation stops.
Which two sides does a price increase act on?
Nominal principal does not move with prices. An RM100,000 deposit and an RM100,000 loan are both still RM100,000 after prices rise 1.78%, but their meaning changes at the same time: the deposit buys less, and the loan is lighter relative to income.
Lost purchasing power is therefore not destroyed. What changes is the relationship between holders of nominal assets and holders of nominal debt. Which side you are on depends on your cash and deposits minus your borrowing, not on either figure alone.
Department of Statistics Malaysia · Headline CPI · BIS · Total credit statistics
What the Malaysian figures show
Malaysia headline CPI, year-on-year change to 2026-07 (DOSM, 2010=100)
What the Malaysian figures show
Real burden reduction at 1.78%
Shared linear scale from zero. Selected entries from the table below. Its dates, units, definitions and limitations still apply.
| Item | Balance | Observation | Real burden reduction at 1.78% |
|---|---|---|---|
| Government debt | RM1,320.8 billion | 2025-Q4 | about RM23.5 billion |
| Household debt | RM1,413.5 billion | 2025-Q4 | about RM25.2 billion |
| Total | — | — | about RM48.7 billion |
Malaysia is unusual in this data set for how evenly the nominal debt is split. Against M2 of RM2,665.3 billion (2026-06), government debt is 49.6% and household debt 53.0%. In markets where one borrower dominates, a single price change mostly moves one balance sheet; here it moves two of similar size.
What the gap between M2 and CPI does and does not say
From 2016-06 to 2026-06, Malaysian M2 multiplied 1.654 times while CPI multiplied 1.194 times. That difference cannot be read as an amount that flowed into asset markets, and the two multiples cannot be subtracted into a single “true inflation” number. M2 measures the stock of a monetary aggregate; CPI measures the price of a defined consumption basket.
Limits of this calculation. The figures apply one year-on-year rate to stock balances, and observation dates differ (debt 2025-Q4, CPI 2026-07, M2 2026-06). The M2 series follows the published classification from 2013-01 with no earlier splice. Debt figures come from BIS total credit statistics, whose coverage differs from the federal government debt totals published by the Ministry of Finance. These amounts cannot be added or subtracted into a net transfer, and they do not settle who actually gained what.
How to use this
Start from your own net position: cash and deposits minus borrowing. Then pick the basis that matches your question. For the cost of a consumption basket, CPI is the closer reference. For the share an amount represents of a monetary aggregate, use the M2 ratio. Different answers reflect different measurements, not an error in one of them.
This site does not forecast prices or recommend assets. What it can do is show the same amount on both bases for a period you choose.
Questions & answers
If my deposits lose purchasing power, who receives it?
There is no single recipient. A price increase lowers the real value of nominal assets and the real burden of nominal debt in the same proportion, so depositors and borrowers are affected in opposite directions. It is an accounting relationship, not income to any institution.
Who gains more in Malaysia, the government or households?
By balance size they are close. Household debt of RM1,413.5 billion is slightly larger than government debt of RM1,320.8 billion (2025-Q4), so the arithmetic gives households a slightly larger reduction. Households also hold deposits, so each household's net effect depends on its own deposits minus borrowing.
Why do M2 and CPI give different multiples?
They measure different things. From 2016-06 to 2026-06 Malaysian M2 multiplied 1.654 times while CPI multiplied 1.194 times. The gap cannot be read as an amount that flowed into asset markets, and the two cannot be netted into one inflation figure.