MALAYSIA’S sovereign rating will be continuously supported by resilient growth and credible policies, including the government’s commitment and good track record on fiscal consolidation efforts, said Bank Negara governor Nor Shamsiah Mohd Yunus.

She said this in response to questions on whether Putrajaya will be able to sustain the higher fiscal deficit and debt as well as the implications towards the country’s sovereign ratings.

“Sovereign ratings for several economies, both advanced and emerging, had been revised due to weaker growth prospects and fiscal positions compared to prior to the global health crisis,” she said during a virtual press conference on Malaysia’s second quarter gross domestic product (GDP) performance today.

“For Malaysia, our sovereign rating will continue to be supported by strong growth resilience and policy credibility including the government’s commitment and good track record towards fiscal consolidation efforts.”

Commenting on the fiscal space following the government’s move to raise the self-imposed debt ceiling, she said while commitment towards fiscal consolidation is key, it is of utmost importance to ensure fiscal support to ensure growth and to protect the economy and vulnerable segments of society.

Examples of this will include measures to minimise job losses, such as the wage subsidy programme.

“These measures will facilitate a faster economic rebound.”

The government had in the past revised the statutory debt ceiling on several occasions in order to have greater flexibility in managing a crisis, Shamsiah noted.

In the wake of the Global Financial Crisis in 2008, the statutory debt ceiling was raised from 40% to about 45% of the GDP.

The limit was subsequently raised to 55% of GDP in 2009.

Last week, the government tabled a bill to increase the ceiling amount of borrowings raised by the government from the current 55% to 60% of GDP.

This is one of the measures in the Temporary Measures for Government Financing (Coronavirus Disease 2019) Bill 2020 to mitigate the impact of the Covid-19 outbreak on the economy.

The bill was tabled for first reading and will likely be passed in the current Dewan Rakyat meeting, which ends later this month.

On a separate note, Shamsiah said the reduction of the overnight policy rate (OPR) by 125 basis points in 2020 had supported the process of economic recovery.

The interest rate cuts have helped ease debt service burden and supports credit expansion and financing activities.

The low borrowing cost will help kick start the economy by enabling more consumption and investment activities.

“While the impact of the recent cut may be less apparent for borrowers during the loan moratorium, borrowers would still benefit from the lower loan repayment after the end of moratorium period.

“So this would therefore ease the burden for borrowers, especially those with floating rate loans and improve their disposable income,” she added.

On whether there will be more rate cuts to come, she said the Monetary Policy Committee will continue to make decisions based on the outlook for growth and inflation. – August 14, 2020.