KUALA LUMPUR, Sept 21 – Bank Negara says the article published by Bloomberg, titled Malaysia Reserve Buffer Seen by Moody’s as Among Weakest in Asia on Sept 18 focuses only on a rigid interpretation of two economic indicators and therefore presents an unbalanced and simplistic assessment of Malaysia’s international reserves adequacy.
Responding to the article, it said the reporting by Bloomberg reflected a lack of understanding of the Malaysian economy, external position, financial system and its economic policies.
“This, together with a penchant for misplaced country comparison, without taking into account country specificities, has led to an erroneous judgment of the Malaysian economy and its external resilience,” it said in a statement.
Explaining in detail, the central bank contextualised the indicators and emphasised that an assessment of the adequacy of reserves should be undertaken with a broader review of Malaysia’s economic and financial developments. As for Moody’s External Vulnerability Indicator (EVI), which measured short-term external debt by remaining maturity over reserves, Bank Negara said they were not a material risk.
“Most of it is accounted by the banking sector, reflecting banks’ operations. This includes centralised liquidity management practices and deposit placement and interbank funding,” it added.
Correspondingly, banks have placements abroad to mitigate currency and maturity mismatches. Also included as part of short-term external debt are inter company loans and trade credits. Inter company loans reflected transactions between foreign direct investment companies and their parent companies.
This is subject to flexible and concessionary terms. In addition, trade credits are usually backed by export earnings which do not entail a claim on international reserves, Bank Negara explained. — Bernama