Central bank says external debt up but still manageable

PETALING JAYA: Malaysia’s external debt amounted to RM883.4 billion, equivalent to US$215.5 billion or 65.3% of gross domestic product as at end-December 2017 (end-September 2017: RM873.8 billion or US$204.7 billion or 64.6% of GDP).
Bank Negara Malaysia (BNM) said in its quarterly bulletin, the higher external debt reflects the increase in loans, interbank borrowing and nonresident (NR) holdings of domestic debt securities.
This was partially offset by valuation effects following the strengthening of the ringgit against selected major and regional currencies during the fourth quarter.
BNM said Malaysia’s external debt remains manageable given its currency and maturity profiles, as well as the availability of large external assets. More than one-third of total external debt is denominated in ringgit (34.3%), mainly in the form of NR holdings of domestic debt securities and in ringgit deposits in domestic banking institutions.
As such, these liabilities are not subjected to valuation changes from the fluctuations in the ringgit exchange rate.
The remaining external debt of RM580.7 billion (65.7%) is denominated in foreign currency and is subject to prudential liquidity management practices and hedging requirements on banking institutions and corporations. The bulk of these obligations are offshore borrowings, raised mainly to expand productive capacity and to better manage financial resources within corporate groups.