Thursday 28 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on November 15, 2018

KUALA LUMPUR: Finance Minister Lim Guan Eng yesterday mocked his predecessor Datuk Seri Najib Razak for not being able to differentiate between a ratings downgrade and an outlook change when the latter shared his thoughts on Moody’s Investors Service’s recent rating action on Petroliam Nasional Bhd (Petronas).

“A former finance minister who has presented nine budgets, and [he] cannot differentiate between a ratings downgrade and just an outlook change, I find it disappointing,” Guan Eng said about the former prime minister when speaking to reporters at the Parliament lobby.

Last Thursday, Moody’s said in a statement it had affirmed the A1 domestic issuer and foreign currency senior unsecured ratings of Petronas. It also changed the ratings outlook to negative from stable, which Moody’s senior vice-president Vikas Halan said reflects Moody’s view that the financial profile of Petronas may deteriorate if the government continues to ask the company to keep dividend payments high, especially should oil prices decline.

On the same day, Najib posted a Facebook message, saying: “Congratulations PH (Pakatan Harapan) government, today Moody’s has ‘downgrade[d]’ the outlook or prospect assessment on Petronas from stable to negative. This is the result of efficient management of the country’s finances, and the smart steps taken in Budget 2019 like the plundering of Petronas to pay high dividends to cover the lack of revenue.”

In response, Guan Eng explained yesterday that there has been no downgrade on Petronas’ ratings by Moody’s, and that only the ratings outlook on the company was changed.

The minister said he is relieved there was no downgrade on Malaysia’s sovereign rating, and that the government will have to work hard to ensure the rating is maintained.

“We know it is very challenging because our fiscal deficit has gone up. Until we can rationalise our fiscal expenditure, I think we will still have to work very hard and continue to contribute and sacrifice those goodies that we used to get,” Guan Eng said.

 

No recalibration of Budget 2019

Guan Eng also said there will be no recalibration of Budget 2019 despite a decrease in global crude oil prices. He said the budget was prepared based on an average 2019 oil price forecast of US$72 per barrel. At the time of writing, Brent crude oil was trading at about US$65 per barrel.

He said the impact of oil price changes have not been much on the government. “At the moment there is no need for recalibration,” he said.

“This year, Petronas was unable to realise the full benefit of the price rise because of a supply shock due to a breakdown of the oil and gas fields in Sabah. So the amount of oil revenue we received was only a few percentage points higher only but was not commensurate with the 30% price rise,” he said.

      Print
      Text Size
      Share