Fiscal Consolidation Pays Off For Malaysia; US Dollar Seen On Weaker Path
By Harizah Hanim Mohamed
KUALA LUMPUR, July 6 (Bernama) -- Malaysia's fiscal consolidation efforts are beginning to bear fruit, with measures to narrow the fiscal deficit and reduce government debt gaining traction despite criticism, signalling a positive outlook for the country's sovereign credit ratings.
'Our foreign reserves have risen to US$119.9 billion from US$115.5 billion in the first half of 2025, while foreign ownership of Malaysian Government Securities (MGS) increased to 35.6 per cent in May from 32 per cent in January.
"This reflects a positive view of the government of Malaysia's creditworthiness,' Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told Bernama.
Although the country's fiscal position is improving, with the fiscal deficit narrowing to 4.5 per cent of Gross Domestic Product (GDP) from 5.7 per cent previously, he highlighted that for the rakyat, fiscal consolidation translates to larger allocations for government assistance programmes, including the Sumbangan Asas Rahmah (SARA) and Sumbangan Tunai Rahmah (STR).
As of the first half of 2025, Malaysia's fiscal deficit has improved to RM34 billion, compared to RM46 billion in the same period last year.
'The government coffers are improving as fiscal consolidation progresses. The government allocated RM13 billion for the STR and SARA programmes in 2025, the highest ever distributed for cash aid in Malaysia, compared to RM10 billion last year," he said.
He further stated that the number of cash aid recipients had increased to 5.4 million from the previous 700,000 beneficiaries, showing that the assistance is now being better targeted rather than disbursed through blanket subsidies.
Mohd Afzanizam noted that this could potentially lead to a more favourable credit review, with Malaysia's current sovereign credit ratings standing at A3 (Moody's), A- (S&P Global Ratings), and BBB+ (Fitch Ratings).
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
2 hours ago
- New Straits Times
NST Leader: Data centre surge
MALAYSIA, a small hydrocarbon producer by world standards, is eyeing the new oil of the 21st century: data centres. Glowing bromide hype on such centres match their power demand surge. On Monday, Hong Leong Investment Bank Bhd (HLIB Research) said in a thematic note to Business Times that Malaysia is no longer a spillover market from Singapore and that it is a go-to destination for hyperscalers. Johor is partly the reason for the hype. From 10 megawatts (MW) of data centres in 2021, the state grew to 1.3 gigawatts last year, according to media reports. Not so fast, we must say. They are not just guzzlers of water and energy, but gobblers of land, too. Sure, there is ample land, as HLIB Research reckons, but only for now. Even cost competitiveness is under threat with the recent Tenaga Nasional Bhd tariff hike. A Reuters report on July 1 quoted industry and government officials as saying that the new tariff hike would add 10 to 14 per cent to the electricity costs of data centres. According to Gary Goh of Sprint DC Consulting, a data centre advisory firm that the news agency quotes, for a 100 MW facility, that works out to be an additional US$15 to US$20 million per year, not including fuel surcharge. Fuel surcharge is announced by the government every month based on fuel prices and foreign exchange. Goh also said many in the industry were caught unprepared for the scale of increase and that some investors were already on the wait-and-see mode. Be that as it may, Reuters, pointing to a joint report issued in May by Bain & Co, Google and Singapore's state-owned Temasek, said Malaysia is set for the region's fastest surge in data centre power demand, tripling to 21 per cent by 2027 from seven per cent in 2022. Malaysia, committed as it is to tame climate change, is slowly but surely phasing out black gold due to its Earth-warming effect. But data centres aren't exactly problem-free. Think guzzlers and gobblers. According to one estimate, a 100 MW data centre consumes electricity equivalent to what 45,000 households use. A data centre with similar capacity is said to use water equivalent to a 10,000-person city in the calculation of Lawrence Berkeley National Laboratory, an American entity. Malaysia may have enough energy and water for now, but what about in the years to come? Many will argue that the data centres are paying a premium for access to energy and water, but both are drawn from the same sources. As more and more data centres come chasing cheap land and energy, electricity infrastructure and rivers will be stressed beyond their capacity. This is precisely why Singapore imposed a moratorium on data centres between 2019 and 2022. On Jan 5, then natural resources and environmental sustainability minister Nik Nazmi Nik Ahmad admitted in an interview with the Financial Times that data centres had put "a lot of pressure" on Malaysia's energy and water resources. For sure, data centres, especially the hyperscalers, bring in billions of investment dollars, but they come attached with a heavy price tag. Can we afford it? Only if the benefits outweigh the costs.
The Star
2 hours ago
- The Star
Ringgit eases against US dollar on US tariff adjustments
KUALA LUMPUR: The ringgit closed lower against the US dollar as market sentiment weakened amid the United States' (US) latest reciprocal tariff policy adjustments, ahead of Bank Negara Malaysia's (BNM) Monetary Policy Committee (MPC) meeting tomorrow. At 6 pm, the local note eased to 4.2365/2445 versus the greenback from Monday's close of 4.2310/2400. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the ringgit depreciated to as low as RM4.2470 to the US dollar during the morning session as worry over the impact of the 25 per cent import tariff by the US has led traders and investors to remain cautious. However, in the afternoon, the ringgit improved to RM4.2358. "Generally speaking, there is still room for discussion and negotiations, and the Malaysian government continues to opt for a diplomatic solution as indicated in the Ministry of Investment, Trade and Industry's (MITI) press statement,' he told Bernama. The US has imposed a higher tariff of 25 per cent on all Malaysian products sent into the country, separate from all sectoral tariffs, effective Aug 1 this year. This is one percentage point higher compared to what was announced in April. MITI said in a statement that Malaysia is committed to continued engagement with the US towards a balanced, mutually beneficial and comprehensive trade agreement. "Tomorrow, the main focus is on the BNM's MPC meeting where economists are quite divided on whether the central bank would resort to a 25 basis point cut in the Overnight Policy Rate (OPR). "In our view, we foresee the BNM would be inclined to reduce the OPR by 25 basis points in order to provide support to domestic demand. As such, dollar-ringgit is expected to maintain its narrow range as traders and investors remain cautious,' said Mohd Afzanizam. Meanwhile, Kenanga Investment Bank Bhd retained its year-end US dollar-ringgit forecast of 4.08, supported by sound domestic fundamentals. Eroding confidence in US fiscal management is driving capital flows towards the European Union (EU) and reform-oriented emerging markets. "Malaysia, with its macro stability and steady foreign direct investment (FDI) inflows, stands to gain from this rebalancing. "A US Federal Reserve (Fed) pivot to interest rate cuts could further lift the ringgit,' said Kenanga in its research note today. As for potential US tariffs targeting BRICS-aligned economies, the investment bank said any escalation could accelerate moves to develop alternative financial systems. "Whether BRICS can parlay this into a more coherent geopolitical front remains to be seen, but their response may help reshape the future of global economic and financial architecture,' it added. At the close, the ringgit traded lower against a basket of major currencies except the Japanese yen. The local currency appreciated versus the Japanese yen to 2.8970/9026 from 2.9091/9155 at Monday's close. It eased against the British pound to 5.7591/7700 from 5.7563/7685 yesterday and declined vis-à-vis the euro to 4.9745/9839 from 4.9647/9752 previously. Meanwhile, the ringgit traded lower against its ASEAN counterparts. It declined versus the Thai baht to 13.0182/0488 from 12.9837/13.0173 at yesterday's close, and slipped vis-à-vis the Singapore dollar to 3.3152/3217 from 3.3096/3172 on Monday. The ringgit weakened against the Indonesian rupiah to 261.4/262.0 from 260.5/261.2 previously, and edged down versus the Philippine peso to 7.51/7.53 from 7.46/7.48 at Monday's close. - Bernama
The Star
2 hours ago
- The Star
Malaysia scores RM1.16bil in potential sales at Paris Airshow
KUALA LUMPUR: Malaysia recorded RM1.16 billion in potential sales at the 55th International Paris Airshow (IPAS 2025), marking a major milestone for the country's high-technology export ambitions. The Malaysia External Trade Development Corporation (MATRADE) said IPAS 2025, held from June 16 to 22, 2025, in Le Bourget, France, served as a platform for Malaysia to showcase its evolving aerospace ecosystem, from advanced manufacturing and maintenance, repair and overhaul (MRO) to aviation training and New Space technologies. "The Malaysian delegation engaged in 145 high-impact business meetings with global buyers, original equipment manufacturers and strategic stakeholders. "Eleven Malaysian companies participated, representing key sub-sectors such as composite aerostructures, aircraft systems, defence-related tech, hydrogen-powered gensets, and fan case manufacturing,' it said in a statement today. MATRADE chief executive officer Datuk Mohd Mustafa Abdul Aziz said the strong outcome at the Paris Airshow demonstrates growing global confidence in Malaysia's end-to-end aerospace capabilities, from precision engineering and MRO to New Space innovation "This momentum reflects the nation's deepening integration into global supply chains, particularly in Europe and the Asia-Pacific. Malaysian exporters must seize this opportunity to scale their international footprint,' he said. Mohd Mustafa said Malaysia's aerospace exports reached RM3.63 billion in the first five months of 2025, signalling continued sectoral resilience and relevance. Meanwhile, MATRADE noted that Malaysia's participation in IPAS aligns with the country's strategic aspirations as outlined in the New Industrial Master Plan 2030 and the Malaysia Aerospace Industry Blueprint 2030, which identify aerospace as a core driver of future-ready industrial transformation. "With a certified supply chain ecosystem, investor-friendly policies, and a highly skilled talent pool, Malaysia offers global aerospace players a compelling and competitive partnership hub in Southeast Asia,' it added. - Bernama
