PM says it will be essential to keep deficits low, while maintaining debt below 55% of GDP

By P PREM KUMAR & MARK RAO / Pic By MUHD AMIN NAHARUL

The government will continue to implement initiatives that would ensure its sovereign credit rating remains within the ‘A’ band.

Prime Minister (PM) Datuk Seri Mohd Najib Razak said it will be essential for the current government to keep deficits low, while maintaining government debt below the self-imposed ceiling of 55% of gross domestic product (GDP).

The two conscious efforts would ensure the sovereign credit rating to remain within the ‘A’ band.

“If our rating is downgraded, lending costs for all, including businesses and individuals seeking loans, would increase.

“All would suffer. The Goods and Services Tax (however) has protected us from that,” Najib, who is also Finance Minister, said at the 2018 Invest Malaysia Conference in Kuala Lumpur yesterday.

S&P Global Ratings’ credit rating for Malaysia stands at A-’ with a ‘Stable’ outlook, while Moody’s Investors Service Inc and Fitch Ratings Inc have fixed credit rating of ‘A3’ and ‘A-’ respectively, with a ‘Stable’ outlook.

In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Malaysia, which in turn would have a big impact on the country’s borrowing costs.

Meanwhile, Najib said the Malaysian Islamic capital market continues its growth momentum by expanding 11.9% to RM1.9 trillion last year.

He said the overall Malaysian capital market grew in strength in 2017 by remaining as key facilitator for financing business growth for the country.

In 2016, Malaysia’s Islamic capital market was RM1.7 trillion in size.

“Since 2009, the FTSE Bursa Malaysia KLCI has increased 105%, and our market capitalisation has increased 187%,” he said.

Najib said last year, foreign net fund inflow recorded a positive RM10.8 billion, the highest since 2012.

Corporate bonds and new issuances of sukuk amounted to RM111.2 billion for the first 11 months of 2017, close to 30% higher than the whole of 2016.

“Malaysia’s bond and sukuk market as a whole grew further to RM1.28 trillion,” said Najib.

He highlighted that the ringgit had appreciated by 10.4% against the US dollar in 2017 and on Jan 5, 2018, it closed at a 17-month high, breaking the four dollar psychological barrier.

“This rise may have been partially underpinned by the recovery in crude oil prices, but it also indicates a positive sentiment among investors and a recognition of Malaysia’s excellent economic and financial fundamentals,” he said.

Najib said the government will continue to strive to make Malaysia even more business- and market-friendly, which includes efforts to improve transparency, accountability and efficiency.

“The government needs to ensure that the Malaysian capital market remains regionally competitive, so that the market continues to evolve in order to sufficiently expand its depth and breadth to serve the needs of our growing economy,” he said.

On another note, Najib also warned seven companies in the Top 100 listed firms with no woman representative on board.

Najib said the number of Top 100 public-listed companies (plcs) with no woman on the board has been reduced from 20 in 2016, to only seven by the end of 2017.

“That’s a progress. But that’s still too many, and I say to those seven: We are watching you!” he stressed.

At the end of 2017, women accounted for 19.2% of directors of Top 100 plcs, compared to 16.6% in 2016.

The government also aims for at least 30% of boards to be made up of women by 2020, Najib added.