KUALA LUMPUR, March 17 — Malaysia is likely to face greater economic challenges this year if it does not address its sovereign debt pile and debt affordability with cuts to trade revenue, Moody’s Investors Service cautioned today.
In an update to its January rating revision for Malaysia, the global credit rating agency said that external pressures still posed a threat even though the government’s implementation of major policy reforms has lessened the negative impact of lower oil prices on its fiscal position.
“While Moody’s notes the government’s proactive fiscal management in demonstrating the commitment to narrower fiscal deficits, the public debt burden and debt affordability has not seen material improvement,” it said in a statement accompanying its annual credit analysis on Malaysia.
In its analysis, it counted interest payments and revenue as contributing to debt affordability.
It said China — Malaysia’s largest trade partner — has been experiencing an economic slowdown, and this could translate to additional “headwinds” in generating revenue for Malaysia.
Moody’s said it expects the government’s debt burden and debt affordability will only see “limited improvement over the near-term horizon of two to three years”.
It attributed its analysis to the country’s revenue being adversely affected by the price fall in commodities and debt as a share of revenue besides saying Malaysia’s debt affordability to be worse off compared to other countries with the same rating.
Malaysia is among the world’s biggest exporters of palm oil and rubber, which have been experiencing volatile price changes in recent months.
In a separate statement to Parliament today, the Finance Ministry disclosed that public debt currently totals RM630.5 billion or 54.5 per cent of the Gross Domestic Product (GDP) and very close to the government’s self-imposed 55 per cent limit.
