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Putrajaya dismisses warning of credit rating downgrade
Published:  Jun 7, 2016 5:46 PM
Updated: 9:50 AM

The Finance Ministry has dismissed warnings that Malaysia may see a credit rating downgrade due to its heavy debt burden including from 1MDB.

According to Bernama, Treasury secretary-general Mohd Irwan Serigar Abdullah dismissed the warning by Oxford Economics, published by Nikkey Asian Review, as baseless.

Mohd Irwan was quoted as saying that the government is committed to ensuring that the country's debt level does not exceed the 55 percent ceiling of gross domestic product (GDP).

"As at the end of 2015, the federal government debt, comprising domestic and offshore debt, was at RM630.5 billion or 54.5 percent of GDP.

"Of the total, 97 percent was domestic debt while the balance was offshore debt.

Thus, the exposure towards foreign exchange rate risk is low," he said.

He said the country's debt level is expected to decrease to 53 percent of GDP this year as a result of fiscal consolidation efforts.

Among the efforts include the transfer of part of debt from the civil servant housing loan scheme to the Public Sector Home Financing Board.

"The federal government deficit in 2015 was at 3.2 percent of GDP and is expected to continue to decrease to 3.1 percent in 2016.

"Besides reducing the deficit in stages, fiscal consolidation measures will also decrease the debt level. The government will continue with its fiscal consolidation measures to ensure it achieves a balanced budget by 2020," he said.

He added Putrajaya would meet its financing needs and debt servicing obligations at minimal cost.

According to a report by the Asian Nikkei Review published online yesterday, Oxford Economics in a report said higher public debt and the prospect of fiscal slippage could be a catalyst for the country's credit rating to be downgraded.

It noted that Malaysia's debt in 2015 was not only 0.5 percent shy of the debt ceiling of 55 percent to GDP, but the country also had debt in excess of 15 percent which were not reflected in the balance sheet.

"Malaysian public debt swelled to 54.5 percent of its GDP in 2015, up from 40 percent in 2008 and near a state-imposed ceiling of 55 percent.

"The rate, noted the report, is the highest since 1992, and far above Indonesia's 29 percent and Thailand's 31 percent.

"The government has in excess of 15 percent of GDP of debt not currently on the balance sheet in the form of contingent liabilities due to commitments to state-owned companies, including 1MDB," it said.

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