Malaysia’s credit rating is unlikely to change – even if the ruling party does – unless there are changes in the country’s long-term policies, says Moody’s Investors Service assistant vice-president Anushka Shah.

According to The Edge Financial Daily, Moody’s would consider it “business as usual” even if BN is dethroned after 61 years in power, because Malaysia’s domestic politics is “a low source of event risk vulnerability to the sovereign’s fundamentals.”

Throughout past electoral cycles, she said, Putrajaya has maintained its fiscal deficit reduction programmes and was committed to policy reforms.

It would take “fundamental changes” in policies, particularly fiscal policies, for a change in ratings.

Moody’s has given Malaysia an A3-stable, or an “upper medium grade” investment rating for international funders.

The Edge noted that Malaysia’s debt-to-GDP ratio was 50.9 percent as at end-June 2017, compared with the median of 40.5 percent among A-rated nations.

“When you look at the debt profile, we find that almost all the debt – about 97 percent – is funded in local currency, and that acts as a mitigating factor in the event there is a currency or interest rate shock.”

1MDB’s debt

Meanwhile, Anushka said Malaysia’s US$100 million foreign exchange reserves were low relative to the nation’s maturing debt obligations.

“You have a large component of external debt, and that means that debt obligations each year are quite sizeable. They are larger than the stock of reserves.

“So I guess that’s a vulnerability on the external account that we take into consideration when we look at Malaysia’s profile.”

On 1MDB’s RM31 billion outstanding debt, she said rating agencies are interested in the government-guaranteed portion, which involved only one bond of RM5.3 billion.

“There is also another US$1.75 billion bond that has a letter of comfort from the government... so those are the risks that we will take into consideration.

“But at this point the probability of 1MDB’s debt crystallisation is low,” she said.

Critics have repeatedly pointed out that the government-guaranteed debts for GLCs are not included in the federal budget, and hence the balance sheet may not accurately reflect the severity of Malaysia’s debt.