Malaysia’s external debt increases to RM931.1 billion but still manageable, says Bank Negara

(Bernama) – Malaysia’s external debt, which stood at RM931.1 billion or 61.3 per cent of Gross Domestic Product (GDP) as at end-June this year, remains manageable.

Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus said the debt remained manageable given its currency and maturity profiles and the presence of large external assets.

“Close to one-third of the external debt is denominated in ringgit (31.7 per cent), mainly in the form of non-resident holdings of domestic debt securities and in ringgit deposits in domestic banks, which are not subject to valuation changes.

“The remaining external debt of RM636.1 billion (68.3 per cent) was denominated in foreign currency (FC) whereby the corporate sector accounted for slightly more than half of it and are largely subject to prudential and hedging requirements,” she said in a press conference when announcing the second quarter GDP data here today.

Compared to end-March this year the external debt (59.5 per cent of GDP) had increased, reflecting mainly the drawdown of interbank borrowings and inter-company loans, she said.

She noted there were also revaluation adjustments from the weaker ringgit against regional currencies during the second quarter, which were partially offset by some liquidation of domestic debt securities and withdrawal of deposits by non-residents.

Meanwhile, she said Malaysia’s flexible exchange rate policy would continue to allow the economy to withstand external shocks.

“The ringgit has played a key role as a shock absorber to ensure external shocks do not translate into disruptions in economic activities.

“We have weathered a number of severe capital outflows and severe depreciation of the ringgit, and yet the economy continues to grow and the market continues to function in an orderly manner,” she said.

Furthermore, she said Malaysia’s ample reserves, amounting to US$103.9 billion (RM434.2 billion)as at July 31, 2019, would be able provide the economy with buffers to deal with external shocks.

She said all of these, coupled with the country’s healthy labour market, would further solidify Malaysia’s fundamentals.