BNM: Reserves remain usable as at end-February 2019

The reserves’ position remains adequate to assist international transactions and nance 7.4 months of retained imports


MALAYSIA’S reserves remained usable as at end-February 2019, with official reserve assets at US$102.36 billion (RM417.9 billion) and other foreign currency assets at US$653.8 million.

The reserves’ position remains adequate to facilitate international transactions, and is sufficient to finance 7.4 months of retained imports and is one time the short-term external debt.

Bank Negara Malaysia (BNM) in a statement last Friday said predetermined short-term outflows of foreign currency loans, securities and deposits — which include among others, scheduled repayment of external borrowings by the government and repayment arising from maturity of the foreign currency Bank Negara Interbank Bills — amounted to US$4.03 billion.

It added that short forward positions amounted to US$18.36 billion, while long forward positions amounted to US$600 million as of Feb 28, 2019, reflecting the management of ringgit liquidity in the money market.

The central bank said the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans amounting to US$2.7 billion in the next 12 months, in line with the practice adopted since April 2006.

It added that the only contingent short-term net drain on foreign currency assets is government guarantees of foreign currency debt due within one year, amounting to US$351.1 million.

“There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. BNM also does not engage in foreign currency options vis-à-vis the ringgit,” the bank said.

In its Annual Report 2018, BNM stated its international reserves fell slightly to US$101.4 billion as at end2018, compared to US$102.4 billion as at end-2017 due to foreign -exchange revaluation changes.

Despite the diversified foreign currency reserves, the bank said the US dollar appreciation against most major currencies during the year resulted in the revaluation losses.

The country’s long-standing policy of decentralisation of international reserves has also resulted in substantial accumulation of external assets by domestic corporations and banks.

These entities now account for approximately 75% of Malaysia’s RM1.7 trillion external assets.

These assets, particularly the liquid share, can be drawn upon immediately to meet resident entities’ external debt obligations without creating a claim on international reserves.

BNM said resident banks and corporations’ liquid external assets are more than sufficient to cover the short-term external debt.

“This further underscores the country’s prudent and responsible external debt management which ensures resident entities’ external debt is self-sustaining,” it said in the report.