As of the end of June this year, Malaysia's external debt was RM913.1 billion, accounting for 61.3% of its gross domestic product (GDP), which is still under control.

Datuk Nor Shamsiah Mohd Yunus, governor of the Bank of Malaysia's National Bank, said debt was still manageable given its currency and maturity and the presence of many external assets.

"Nearly a third of the foreign debt is measured in ringgit (31.7%), mainly domestic debt securities held by non-residents and ringgit deposits in domestic banks, which are not affected by changes in valuation.

"The remaining RM636.1 billion (68.3%) of foreign debt is denominated in foreign currency (FC), of which the corporate sector accounts for more than half of the foreign debt and is largely subject to prudence and hedging requirements," she said in a report. The press conference is here today when the second quarter GDP data is announced.

She said that compared with the end of March this year, external debt increased (accounting for 59.5% of GDP), mainly reflecting a decrease in interbank borrowing and intercompany loans.

She pointed out that the weakening of the ringgit against the regional currency in the second quarter also readjusted but was partially offset by the liquidation of domestic debt securities and deposits withdrawn by non-residents.

At the same time, she said that Malaysia's flexible exchange rate policy will continue to expose the economy to external shocks.

"The ringgit acts as a shock absorber, ensuring that external shocks do not translate into interruptions in economic activity.

"We have experienced many severe capital outflows and severe devaluations of the ringgit, but the economy continues to grow, and the market continues to operate in an orderly manner," she said.

She also said that as of July 31, 2019, Malaysia's sufficient reserves totaled US $ 103.9 billion (434.2 billion ringgits), which would provide the economy with a buffer against external shocks.

All of this, coupled with the country's healthy labor market, will further strengthen Malaysia's fundamentals, she said.

(Source by Bernama)