Najib: Negative credit outlook just temporary

KUALA LUMPUR, Aug 1 — Prime Minister Datuk Seri Najib Razak has downplayed Fitch Ratings’ negative outlook on Malaysia’s sovereign credit rating, describing it as a temporary setback that would be addressed in the 2014 Budget.

The Global ratings agency had recently revised Malaysia’s sovereign credit rating outlook from stable to negative following scepticism over the Najib administration’s ability to manage its finance weaknesses after Election 2013.

Fitch, however, affirmed the country’s long-term foreign and local currency issuer default ratings at A- and A, respectively.

”There are two things to the rating. One is that it affirmed our rating.

”Second is jut the revision of our outlook but that depends on the move the government would make but it is a concern that we share as a government and we would seek to address those concerns,” he told reporters after a launching the Islamic Finance Marketplace at Bank Negara here.

No details, however, were given as to how Putrajaya plans to tackle some of the concerns raised in the Fitch report, but Najib said his administration is looking at the various existing policy options as a short-term solution.

”The actual details would be unveil specifically in the forthcoming Budget. At the moment we’re just looking at the various policy options to understand that there is a need to strengthen the fiscal and macro position,” he said.

The revision from a stable outlook adds to concerns over Malaysia’s high debt pile at a time when the currency has been pressured by bond fund outflows and talk of the US Federal Reserve ending its easy monetary policy.

Rival ratings agencies Standard and Poor’s and Moody’s both have a “stable” rating on Malaysia’s sovereign debt.

“Prospects for budgetary reform and fiscal consolidation to address weaknesses in the public finances have worsened since the government’s weak showing in the May 2013 general elections,” Fitch said in a statement.

“Malaysia’s public finances are its key rating weakness.”

The long-ruling Barisan Nasional coalition retained power in May elections, but saw its parliamentary majority weakened in a vote that exacerbated racial divisions in the multi-ethnic country.

Najib, who could face a ruling party leadership challenge in October, has announced no fresh steps to cut the fiscal deficit, such as a long-anticipated consumption tax or a reduction in the government’s heavy subsidies for fuel and food.

Fitch noted that petroleum revenues make up a third of Malaysia’s government revenues, in line with Mexico, a country that has a lower rating of BBB+. Malaysia has a long-term foreign debt rating from Fitch of A-.

Persistent high deficits have pushed the federal government’s debt to 53.3 per cent of gross domestic product at the end of last year from 39.8 per cent at the end of 2008. Malaysia has targeted a reduction of its budget deficit to three per cent by the end of 2015 from 4.7 per cent last year.

The ringgit weakened slightly after the Fitch statement, falling 0.2 per cent to 3.2310 per US dollar by 0907 GMT (4.07pm Malaysian time) yesterday. Before the revision, the ringgit was around Monday’s close of 3.2260.

Earlier yesterday, it fell to 3.2365 per dollar, its weakest since July 1, 2010, pressured by bond outflows. It touched 2.5520 to the Singapore dollar, the weakest since July 1998.

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