BNM posts stronger reserves after lambasting 'unbalanced' assessment of its coffers

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KUALA LUMPUR (Sept 21): After lambasting a news report yesterday for its "unbalanced and simplistic" assessment of Malaysia's international reserves adequacy, Bank Negara Malaysia (BNM) updated today its international reserves has strengthened 0.3% to US$100.8 billion as at Sept 15, compared with US$100.5 billion half a month earlier.

"The reserves position is sufficient to finance 7.7 months of retained imports and is 1.1 times the short-term external debt," BNM said in a statement today.

As at Sept 15, Malaysia's foreign currency reserves comprised the biggest portion of reserves at US$94.3 billion, up from US$94 billion as at Aug 30, while IMF reserves position remained at US$800 million.

Also maintained were: special drawing rights (SDRs) at US$1.2 billion, gold at US$1.5 billion, and other reserve assets at US$3 billion.

Total assets as at Sept 15 stood at RM464.97 billion, up near 1% from RM460.4 billion as at Aug 30, according to BNM's data.

Yesterday, BNM, via a statement, refuted Bloomberg's recent article titled Malaysia Reserve Buffer Seen by Moody's as Among Weakest in Asia; the central bank said the article focused only on a rigid interpretation of two economic indicators.

BNM said the two indicators used, Moody's External Vulnerability Indicator (EVI) and International Monetary Fund (IMF)'s Reserve Adequacy Metric (ARA EM), did not portray a broad enough review of Malaysia's economic and financial developments.

On EVI, which measures short-term external debt by remaining maturity over reserves, the central bank said these debts are "not a material risk" and are mostly accounted by the banking sector.

"Trade credits are usually backed by export earnings which do not entail a claim on international reserves," the statement read.

On the ARA EM method used, BNM said Moody's had "failed to acknowledge the IMF's overall assessment that Malaysia's reserves are deemed adequate" under the flexible ringgit exchange rate and availability of external assets for borrowers to meet external obligations.

"The reporting by Bloomberg reflects a lack of understanding of the Malaysian economy, external position, financial system and its economic policies," it said.

It is also worth noting that BNM had emphasised yesterday that international reserves is not the only means to meet the country's external obligations.

The central bank cited the country's strong external assets and net international investment position as among other measures to be included in assessing the Malaysian economy.