This article first appeared in The Edge Financial Daily, on October 23, 2015.

KUALA LUMPUR: The international reserves of Bank Negara Malaysia (BNM) amounted to US$94.1 billion (RM418 billion) as at Oct 15, higher than the US$93.3 billion (RM415.1 billion) recorded as at Sept 30 — providing hope for a reversal after four straight months of decline.

The central bank’s foreign reserves fell by US$13.1 billion in the four months from June to September, slipping below the US$100 billion mark to US$96.7 billion in July.

In mid-September, there was similar hope of a reversal in declines when the central bank said its reserves stood at US$95.3 billion as at Sept 15, higher than US$94.5 billion as at end-August. However, the reserves resumed their decline in the last two weeks of September to end at US$93.3 billion.

In a statement yesterday, BNM said that at US$94.1 billion, the reserves are sufficient to finance 8.8 months of retained imports and is 1.2 times short-term external debt.

Dr Yeah Kim Leng, the School of Business dean at the Malaysia University of Science and Technology, said the slight increase in international reserves served as a good sign as it showed that the drop in the ringgit had not put further pressure on the reserves.

“The level of international reserves is a closely-watched indicator. The eventual interest rate hike by the US Federal Reserve rate may cause larger outflow.

“It is important that we have adequate level reserves to cushion the possible outflow [then],” he told The Edge Financial Daily yesterday.

He said further improvement will very much depend on the economy and the local issues that are affecting the confidence level [of investors and consumers alike].

Yeah pointed out that a country should have sufficient reserves to finance at least three months of imports.

“At the current global volatile market, it’s important to have not less than five to six months,” he said, adding that BNM’s latest reserves which can finance 8.8 months of retained imports are at a sufficient level.

As for short-term external debt, Yeah said as long as it can cover more than 1 time, economists would view it as a comfortable level.

BNM’s reserves fell to 1 time short-term debt in August, but had since recovered to 1.2 times.