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Moody’s looks at aid to Felda as credit negative

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KUALA LUMPUR, April 18 2019 : Moody’s Investors Service Ltd views the Malaysian government financial aid totalling RM6.2 billion to the Federal Land Development Authority (Felda) as credit negative.

The rating agency, however, noted that with a cash balance shrinking at Felda, the state-owned agency is unlikely to be able to meet its debt obligations without the government’s assistance.

Moody’s said the assistance will raise the government’s debt burden by 0.3 per cent of gross domestic product (GDP) to 56.0 per cent in 2019, substantially higher than median debt ratio for A-rated sovereigns of 37.8 per cent.

“In our estimates, we include the debt of state-owned investment fund 1Malaysia Development Bhd and RM20 billion of funding provided to Tabung Haji, the state-owned pilgrimage fund, at the end of last year through an asset-backed sukuk.

“Higher debt burden will weigh on Malaysia’s debt affordability, particularly because the share of revenue to GDP at 16.3 per cent in 2018, while interest payments account for 13.3 per cent of revenue, significantly higher than the A-rated median of 4.0 per cent,” said Moody’s in a statement today. – Bernama

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