AT a forum last month, Bank Negara Malaysia governor Nor Shamsiah Mohd Yunus was reported to have said foreign currency borrowings only account for less than 3% of total federal government debt.

She said Malaysia has a strong external position with more foreign currency assets than foreign currency liabilities.

She also said the ringgit depreciation is also expected to benefit export-oriented sectors, which employed more than 30% of the Malaysian workforce.

To claim that the nation is not severely affected is an understatement.

The depreciation of the ringgit effectively increased the cost of servicing the debt issued by 1Malaysia Development Bhd (1MDB), that is, the government will need to pay more from now on.

In its fiscal outlook report, the Finance Ministry (MOF) said 1MDB’s outstanding financial obligations were estimated at RM31.6 billion as at end-June 2022, comprising a debt principal of RM25.9 billion and projected interests or profits of RM5.7 billion.

The ringgit was trading at 4.38 against the US dollar as at end-June.

In March, the finance minister told the Dewan Rakyat that the government still needed to cover a shortfall of RM17 billion to repay the remaining balance in principal and interest of 1MDB’s debt, totalling RM38.8 billion for the 2023-2039 period.

The minister said public funds had been used and would still need to be used to settle the debt, whether in terms of direct assistance or through asset recoveries, and the government would continue to ensure it is paid on time.

It was reported that the government needs to redeem one tranche of 1MDB bonds that is due in March next year of US$3 billion.

When this was revealed on October 14, the ringgit was at 4.69 to the US dollar, which would mean the US$3 billion is equivalent to RM14.08 billion.

On November 4, the ringgit was trading at 4.75 against the dollar. The US$3 billion allocation would now be equivalent to RM14.25 billion, an increase of almost RM170 million.

Yet, the finance minister and the Bank Negara governor downplayed the depreciation of the ringgit, with both saying it will not impact the country’s financials much. – November 6, 2022.

* FLK reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.