COMMENT I thank Minister in the Prime Minister’s Department Abdul Wahid Omar and his office colleagues for taking time to respond to my assertion last Friday on Moody’s Investors Service’ s ratings downgrade .

That said, l honestly feel they're missing the point. They are frantically defending an indefensible position. Their arguments on GII (government investment issues) are arguably valid, but rather misplaced though.

I premised my argument on the prospect that borrowing cost is not only going to rise but has in fact already risen.

I thought I made it very clear that the bone of contention was never about whether a downgrade and revision would have a different effect on cost of borrowing.

Rather, whichever terms Wahid chooses to use, the fact remains that according to the report of a research house, ie Maybank Islamic Asset Management as quoted by Bloomberg, the benchmark sukuk yields will rise to 5 percent.

Besides, the report said that the outlook for higher borrowing costs has also already hurt Malaysia's lslamic bond sales in 2015.

The latest report that has appeared in the last 24 hours vindicates my claim further, though not related to a credit-rating downgrade; a higher borrowing cost, albeit in the banking sector, is now happening.

Borrowing costs are set to rise in Malaysia, with a number of banks having raised their base rates (BR), partly as a result of a liquidity crunch brought about by a shortage of the ringgit and US dollars as alluded to by analysts.

Foreign banks including OCBC Bank (Malaysia) are raising BR by 11 basis points, taking it from 3.89 to 4 percent. Its base lending rate (BLR) has gone from 6.85 to 6.96 percent.

United Overseas Bank (Malaysia) had effected its increase immediately after the new year, boosting its BR from 3.92 to 3.99 percent, and its BLR from 6.85 to 6.92 percent.

HSBC is expected to make an even more significant hike - 15 basis points, taking its BR to 3.95 percent (from 3.75) and its BLR to 7 (6.85) percent.

No effect on rates?

The hikes to the base rate - and consequently the effective lending rate (ELR) - have emerged despite Bank Negara Malaysia still maintaining the benchmark key overnight policy rate (OPR) at 3.25 percent.

This is not to add further pressure to businesses and individuals struggling with loan repayments in a weak economy made worse by a feeble ringgit.

I don’t think I need to remind the minister that the ringgit has lost about a third of its value over the past 15 months against the greenback.

Well, Wahid could say otherwise, but the fact remains that you have already observed a rise in borrowing on sukuk and now, banks increasing their BR and subsequently ELR.

It goes without saying that this will surely add on to the cost of borrowing for mortgages, domestic loans and businesses on the overburdened rakyat and businesses.

DZULKEFLY AHMAD is Parti Amanah Negara strategy director.