Bank Negara refutes Bloomberg report, says Malaysia still resilient to external shocks

20 Sep 2017 / 21:30 H.

    PETALING JAYA: Bank Negara Malaysia (BNM) stressed that the nation remains resilient and international reserves are not the only means to meet external obligations.
    The central bank was responding to an article published by Bloomberg entitled “Malaysia Reserve Buffer Seen by Moody’s as Among Weakest in Asia”.
    BNM said Malaysia’s net international investment position of 3.3% of gross national income (GNI) strengthens Malaysia’s resilience to a variety of shocks, including potential outflows.
    It noted that the progressive liberalisation of foreign exchange administration rules also resulted in greater decentralisation of reserves, which is reflected in the increasing acquisition of assets abroad by resident banks and corporates.
    “In particular, banks and corporates hold three-quarters of Malaysia’s external assets (as at end-Q2’2017: RM1.3 trillion), which can also be drawn upon to meet their external debt obligations (as at end-Q2’2017: RM673.8 billion), without creating a claim on BNM’s reserves, it said, adding that Malaysia’s external assets have exceeded the external liabilities since 2015.
    Citing Bloomberg’s recent report on the country’s reserves presenting an unbalanced and simplistic assessment, BNM said it is only focusing on a rigid interpretation of two economic indicators, which is a reflection of a lack of understanding of the Malaysian economy, external position, financial system and its economic policies that led to an erroneous judgment of the country’s economy and its external resilience.
    The central bank reiterated that Moody’s External Vulnerability Indicator, which measures short-term external debt by remaining maturity over reserves, are not a material risk.
    “Most of it is accounted for by the banking sector, reflecting banks’ operations. This includes centralised liquidity management practices and deposit placement and interbank funding. Correspondingly, banks have placements abroad to mitigate currency and maturity mismatches,” it said.
    On the International Monetary Fund (IMF)’s Reserve Adequacy Metric, the central bank said Moody’s failed to acknowledge the IMF’s overall assessment that Malaysia’s reserves are deemed adequate, given the flexible ringgit exchange rate and availability of external assets for borrowers to meet external obligations.
    “In fact, the IMF’s July 2017 External Sector Report had concluded that Malaysia’s international reserves is adequate, at 115% of the IMF’s ARA metric, under a floating exchange rate regime,” it added.

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