Ratings agency Fitch cut its outlook on Malaysia’s sovereign debt to negative on Tuesday, citing gloomier prospects for reforms to tackle the Southeast Asian country’s rising debt burden following a divisive election result this year.
The revision from a stable outlook adds to concerns over Malaysia’s high debt pile at a time when the currency has been pressured by bond fund outflows and talk of the U.S. Federal Reserve ending its easy monetary policy.
“Malaysia’s public finances are its key rating weakness.”
Fitch noted that petroleum revenues make up a third of Malaysia’s government revenues, in line with Mexico, a country that has a lower rating of BBB+. Malaysia has a long-term foreign debt rating from Fitch of A-.
Persistent high deficits have pushed the federal government’s debt to 53.3 percent of gross domestic product at the end of last year from 39.8 percent at the end of 2008. Malaysia has targeted a reduction of its budget deficit to 3 percent by the end of 2015 from 4.7 percent last year.
The ringgit currency weakened slightly after the Fitch statement, falling 0.2 percent to 3.2310 per dollar by 0907 GMT. Before the revision, the ringgit was around Monday’s close of 3.2260.
Earlier on Tuesday, it fell to 3.2365 per dollar, its weakest since July 1, 2010, pressured by bond outflows. It touched 2.5520 to the Singapore dollar, the weakest since July 1998.
source: Yahoo Finance