KUALA LUMPUR — Aug. 16, 2019: Malaysia’s external debt, which stood at RM931.1 billion or 61.3 per cent of Gross Domestic Product (GDP) at the end of last June, remains manageable, maintains Bank Negara, given its currency and maturity profiles and the presence of large external assets..
Close to one-third of the debt was 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 remainder of RM636.1 billion was denominated in foreign currency, whereby the corporate sector accounted for slightly more than half of it and are largely subject to prudential and hedging requirements, said the central bank’s governor Datuk Nor Shamsiah Mohd. Yunus when announcing the second quarter GDP data today.
Compared to end-March, the external debt (59.5 per cent of GDP) had increased, reflecting mainly the drawdown of inter-bank borrowings and inter-company loans.
Nor Shamsiah 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.
She also said that 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, Malaysia’s ample reserves, totalling US$103.9 billion as of July 31, would be able provide the economy with buffers to deal with external shocks. — Bernama