Penang's RM1.5 billion in reserves outweigh its federal debt of just RM69 million, boasted chief minister Lim Guan Eng.

But while the state can easily pay off what it owes Putrajaya, Lim said some debt is necessary.

"I can call my financial officer right now and tell him, 'Datuk, go to the ATM machine and pay the federal government'.

"But we have to keep some debt so that we can ask for money from Prime Minister Najib Abdul Razak," he said in jest at a fundraising dinner in Kuala Lumpur last night.

He said that if Penang had no debt, the federal government would assume it was well off and did not need more money.

Penang's federal debt is the lowest in Malaysia. 

According to statistics released by Parliament, as of Dec 31 2015 the state with the highest debt is Pahang, which owes Putrajaya RM2.9 billion.

The federal to state loans are meant to fund the development of basic infrastructure such as water supply, low cost housing, industries and other projects