“Our authorities welcome our staff’s assessment that Malaysia’s external debt remains manageable under a variety of shocks,” it said today.

Malaysia’s external debt stood at RM873.8 billion, or US$204.7 billion, as at end-September 2017, equivalent to 65% of the gross domestic product (GDP). In 2016, it was RM916.9 billion, or US$202.3 billion, which was 74.5% of the GDP.

Malaysia’s external debt is supported by a favourable debt structure with about 34% of external debt denominated in ringgit.

The remaining external debt denominated in foreign currency is mostly held by banking institutions, which are subject to the central bank’s management, it said in the staff report which was prepared by an IMF staff team for the executive board’s consideration on Feb 9, 2018.

It followed discussions that ended on Dec 8, 2017, with Malaysian officials on economic developments and policies.

The staff report was completed on Jan 24, 2018.

The staff’s assessment of Malaysia’s higher external financing vulnerabilities relative to peer median does not sufficiently take into account Malaysia’s degree of openness and financial market depth.

For instance, Malaysia has the second largest local-currency denominated bond market in Asia (relative to GDP, excluding Japan), with active non-resident participation.

The banking sector’s external exposures are also in line with centralised liquidity management practices of domestic banks with large regional footprints and strong presence of locally-incorporated foreign banks. Importantly, any assessment should also consider Malaysia’s external assets.

Malaysia’s external assets are mostly denominated in foreign currency (95%), while a significant share of Malaysia’s liabilities are in domestic currency (59.5%).

Non-foreign direct investment (FDI) foreign-currency assets exceed foreign-currency liabilities.

Hence, the potential claim on international reserves from non-FDI liabilities would be limited, it said.