Malaysia’s debt profile can mitigate currency, interest rate shocks

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MALAYSIA’s debt profile, mainly funded by the ringgit, acts as mitigation against currency or interest rate shocks.

Moody’s Investors Service sovereign risk group assistant vice-president Anushka Shah said the debt profile factored in Malaysia’s A3 rating.

“The rating is underpinned by strong growth, large and diverse economic structure and ample natural resources. Malaysia is also one of the fastest-growing A-rated sovereigns,” she said at Moody’s Media Roundtable: Inside Asean – Spotlight on Malaysia, in Kuala Lumpur, today.

However, Anushka said, there were concerns Malaysia’s government debt to gross domestic product of about 51% was higher than the 41% median of other A-rated sovereigns. 

“Other concerns include the declining growth rate of the working-age population and downside global risks such as trade protectionism,.

Anushka said Malaysia’s large buffer of foreign-exchange reserves could also mitigate external vulnerabilities.

“The government is maintaining its fiscal deficit reduction stance and committed to a reform policy agenda,” she said.

On the impact of 1Malaysia Development Bhd debts on the country’s rating, she said, the current probability of debt crystallisation from 1MDB was low and was not viewed as a risk to Malaysia’s fiscal position.

Meanwhile, on Petroleum Sarawak Bhd (Petros) starting oil and gas (O&G) exploration this year, Moody’s vice-president Vikas Halan said it was too early to quantify the impact.

“We do not how this will pan out but we see that Petronas won’t be much impacted. It is too early to say but our base case is no change in legal status of Petronas as the exclusive explorer and owner of the (oil) resources,” he said. 

Sarawak Chief Minister Abang Johari Tun Openg recently said Petros would kickoff its exploration activities in Miri this year after the state assumed full regulatory control over both upstream and downstream O&G activities. 

“For us, it is wait and see (the impact). Moving forward, all exploration will come under this company but nothing that Petronas is producing will go away,” said Vikas, adding that, it would be better to have an open industry. – Bernama, March 21, 2018.

Source: https://www.themalaysianinsight.com/s/44310

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