Malaysia's external debt lower in Q2 at RM877b

The overnight policy rate (OPR) has been raised by 25 basis points to 3.25% by Bank Negara, with the floor and ceiling rates for the OPR correspondingly raised to 3.00% and 3.50% respectively.

KUALA LUMPUR: Malaysia’s external debt declined to RM877.5bil at end-June 2017 from  end-March as the ringgit firmed up against selected major and regional currencies and also due to net repayment of interbank borrowings during the second quarter.

Bank Negara Malaysia (BNM) said on Friday the external debt of RM877.5bil was equivalent to US$202.3bil or 66.9% of GDP as at end-June 2017.

This was an improvement from end-March 2017's RM897bil (US$200.8bil). 

“The lower external debt largely reflects the valuation effects following the strengthening of the ringgit against selected major and regional currencies and net repayment of interbank borrowing during the second quarter. 

“There were also net repayment of intercompany loans and redemption of maturing bond and notes by the private sector. These declines were partly offset by an increase in non-resident holdings of domestic debt securities, especially Malaysian Government Securities (MGS), and a small increase in non-resident deposits,” it said.

BNM said Malaysia’s external debt remains manageable given its currency and maturity profiles, as well as the availability of large external assets. 

“About one-third of total external debt is denominated in ringgit (32.8%), mainly in the form of NR (non resident) holdings of domestic debt securities and ringgit deposits in domestic banking institutions. As such, these liabilities are not subjected to valuation changes from the fluctuations in the ringgit exchange rate. 

BNM also said in Q2 2017, the financial account registered a net inflow of RM7.3bil (Q1 2017: net outflow of RM8.8bil). This was mainly due to a turnaround in the portfolio investment account (net inflow of RM16bil; Q1 2017: net outflow of RM31.9bil).
 
It also pointed out portfolio investment by non-residents recorded a net inflow of RM18.8 billion (Q1, 2017: net outflow of RM22.9bil), due mainly to a resumption in purchases of Malaysian Government Securities (MGS) and higher participation in the equity market. 

BNM also said investor sentiments improved during the quarter, supported by the announcement of initiatives to develop the onshore financial market, stronger ringgit performance, expectations of better corporate earnings outlook and domestic growth prospects. 

“Resident portfolio investment registered a lower net outflow of RM2.8bil (Q1, 2017: net outflow of RM9bil), as the continued net acquisition of equity securities abroad by domestic fund managers was partially offset by net liquidation of debt securities overseas,” it said.