KUALA LUMPUR: Malaysia’s good ratings, complemented by the depth of the country’s capital market, is a shot in the arm for the government if the need arises for it to raise additional fund to further stimulate the domestic economy hampered by the COVID-19 pandemic.
“Domestic borrowings and bond issuances seem to be the option to raise funding for any additional stimulus packages or fund, if required, ” Bank Muamalat Malaysia Bhd economist Izuan Ahmad said.
The suggestion is supported by the fact that Malaysia’s rating is still intact, that has been reaffirmed by international rating agencies, albeit a ‘Negative’ outlook by Fitch Ratings, he said.
Izuan was asked on the International Trade and Industry Minister’s Datuk Seri Mohamed Azmin Ali’s comment recently that the government has the capacity to fund its recently-announced stimulus package, but if additional aid was needed the Finance Ministry would decide whether to issue bonds.
Last month, the S&P Global Ratings affirmed its ‘A-‘ long-term and ‘A-2’ short-term foreign currency sovereign credit ratings on Malaysia and said the outlook on the long-term rating remained stable.
The government has announced two stimulus package and additional funding worth RM260bil, with RM10bil of the total amount, will be channelled to assist the affected Small and Medium Enterprises (SMEs).
The move will see the country’s budget deficit increase to 4.7% this year from an earlier projection of 3.2%.
The government’s direct fiscal injection to Malaysians and businesses totalled RM35bil.
Meanwhile, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the government has the flexibility to issue ringgit denominated bonds given the depth of the Malaysian capital market.
The flexibility is further supported by the country’s large local institutional investors such as the Employees Provident Fund (EPF), Pensions Trust Fund (KWAP), Insurance companies, banking Institution and foreign investors.
Ringgit denominated debts account 96% of total government debt. — Bernama
“So, the bulk of the government borrowings is in ringgit and therefore, there is no issue on its ability to repay the debts because most of it is in ringgit, ” he explained.
Source : https://www.thestar.com.my/business/business-news/2020/04/20/good-ratings-a-shot-in-arm-for-govt-if-funds-needed