KUALA LUMPUR, Oct 2 — The ringgit led losses in Asia and stocks retreated as concern Malaysia may miss its target of balancing the budget by 2020 hurt a currency already reeling from a worsening slowdown in China and allegations of corruption against Prime Minister Najib Razak.

The fiscal shortfall may be “in the region” of 1 per cent of gross domestic product at the end of the decade, compared with a current deficit of 3.2 per cent, the New Straits Times reported yesterday, citing comments by Najib to fund managers and investors in New York. Malaysia derives 22 per cent of government revenue from oil-related sources and its finances have been sapped by a 49 per cent drop in Brent crude over the past 12 months.

The ringgit fell 0.9 per cent, the biggest decline in more than a week, to 4.4415 a dollar as of 10.11am in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It’s dropped 21 per cent so far in 2015, trailing only the Brazilian real, Turkish lira and Colombian peso among 24 emerging markets tracked by Bloomberg amid a deepening slowdown in China and the prospect of higher US interest rates.

“The ringgit seems to continue to be Asia’s underperformer,” said Mitul Kotecha, head of foreign-exchange and rates strategy for Asia at Barclays Plc in Singapore. “There are generalised factors which have been China, the Federal Reserve and slowing growth. If there are concerns about the budget balancing, that clearly could be an issue as well.”

Political situation

Reports last month in The Wall Street Journal and The New York Times over alleged money laundering and overseas property purchases relating to state-owned investment company 1Malaysia Development Bhd and Prime Minister Najib have further weighed on sentiment towards Malaysia.

Investors in the US shouldn’t be concerned with the political situation in Malaysia as there is “stability”, Najib was cited by the New Straits Times as saying. 1MDB will sort out its financial issues before year-end and is expected to further reduce its debt by RM16 billion (US$3.6 billion) very soon, Najib said, without elaborating. The country also remains committed to achieving a balanced budget by 2020, he said.

The benchmark FTSE Bursa Malaysia KLCI Index of stocks retreated 0.5 per cent today, after two days of gains. The gauge has fallen 7.7 per cent this year as foreign funds pulled US$4 billion from Malaysian shares. The yield on five-year sovereign bonds was steady at 3.79 per cent today and is down eight basis points this week, according to prices from Bursa Malaysia. — Bloomberg