KUALA LUMPUR: Finance Minister Datuk Seri Najib Razak said Malaysia’s external debt stood at RM744.7 billion as at end-2014, more than tripled from RM196 billion in 2013. 

“Malaysia’s external debt of RM740 billion for the third quarter of 2014 is higher from RM41.5 billion for 1990 and RM196 billion at the end of 2013.

“The huge increase for the country’s external debt is a result of the new defined terms for the country’s external debt that came into play since 2014,” said Najib, who is the Prime Minister, in a written reply to PKR’s Selayang MP William Leong Jee Keen. “Despite the fact, it is important to highlight that the federal government’s external debt remains low at RM16.8 billion or 1.6% of the GDP,” he pointed out.

Under the redefined terms, Malaysia’s total external debt comprises offshore borrowing by the federal government, public enterprises and the private sector as well as non-resident holdings of ringgit-denominated debt securities, non-resident deposits and trade credit.

The increase in the country’s external debt was also due to two thirds of the debt being ringgit-denominated debt securities held by non-residents. 

To recap, the IMF had proposed a wider coverage for external debt, taking into account  non-resident holdings of local currency-denominated debt papers and other debt-related non-resident financial flows, such as trade credits, currency and deposits, and other loans and liabilities.

Under this definition, the external debt would include all liabilities that require payment of principal and/or interest at some point in the future, and are owed to non-residents by residents of an economy irrespective of the currency denomination of the debt.

As of Dec 31, 2014, Najib said the federal government’s total debt stood at RM582.8 billion or 54.5% of the GDP. 

“Of the total amount, 97.1% or RM566.1 billion is domestic debt with the remaining RM16.8 billion or 2.9% being offshore loans. 

“The federal government’s debt position remains manageable and [is] categorised as a moderate-indebtedness country,” he added.

Najib also said the government remains committed to ensuring that federal government debt does not exceed 55% of the GDP.

It is worth noting that Bank Negara Malaysia stated that Malaysia’s external debt stood at RM696.6 billion in 2013. Analysts said it was likely BNM data for 2013 included government bonds held by foreigners.

This article first appeared in The Edge Financial Daily, on March 12, 2015.