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BNM Redefines External Debt To Include Ringgit-Denominated Securities

[ 26-05-2014 ]
BNM Redefines External Debt To Include Ringgit-Denominated Securities
KUALA LUMPUR, May 16 (Bernama) -- Bank Negara Malaysia has redefined its external debt to include non-resident holdings of ringgit-denominated debt securities, non-resident deposits, trade credits provided by foreign trade counterparts and other debt liabilities.

The redefinition, effective from the first quarter of 2014, is in recognition of the significant developments in the depth and breadth of Malaysia's financial markets and the consequent increase in the participation of non-resident investors in ringgit-denominated domestic debt securities in recent years.

As at end of March 2014, Malaysia's redefined external debt stood at RM700.1 billion, equivalent to US$212.5 billion or 65.2 per cent of gross domestic product (GDP) compared with RM694.6 billion or US$209.2 billion, equivalent to 70.4 per cent of GDP as at end-December 2013.

Governor Tan Sri Dr Zeti Akhtar Aziz said the increase in the external debt was due mainly to higher offshore borrowing by the private sector and non-resident holdings of ringgit-denominated debt liabilities.

"More than half of the total external debt has a long-term maturity profile," she told a press conference after announcing Malaysia's first quarter GDP here Friday.

She said the short-term debt remained manageable with reserves coverage of 1.3 times as at end-March 2014 while Malaysia's external position remains resilient, underpinned by sound domestic economic fundamentals.

The previous practice adopted by Malaysia in calculating its external debt consisted of foreign currency-denominated debt, namely loans raised, and bonds and notes issued offshore.

Following the redefinition, the potential for currency mismatches in the country's external indebtedness is reduced since these debt securities are ringgit-denominated obligations.

"It is also crucial to note that the federal government debt remains unchanged. The redefinition of external debt is a prudential measure which allows the government to better assess its exposure to non-residents.

"Importantly, although the redefined external debt level is higher, Malaysia's external indebtedness indicators remain within the international benchmark for prudence and external soundness," she added.