Malaysia’s external debt risk manageable, says MoF

The finance ministry said Malaysia continues to maintain its position as a net creditor country. (Envato Elements pic)

KUALA LUMPUR: The finance ministry (MoF) said Malaysia’s overall external debt risk remains manageable, supported by a favourable maturity and currency profile.

MoF said external debt amounted to RM1.4 trillion, or 69.4% of gross domestic product (GDP) at the end of the third quarter of 2025 (3Q 2025).

It said the level was manageable and is not detrimental to the country’s economic prospects.

Based on the International Monetary Fund’s (IMF) Debt Sustainability Framework, external debt risk can be detrimental if accompanied by a large short-term debt, high foreign currency loan exposure and a current account deficit in the balance of payments.

“This risk does not exist in the Malaysian context.

“In terms of debt maturity, 56.9% of external debt as of 3Q 2025 comprised medium and long-term debt, which limits the risk of refinancing,” the ministry said in a written reply on the Parliament website.

It was responding to a question from Hamzah Zainudin (PN-Larut) on the concrete steps taken by the government to ensure the country’s ability to cope with external debt, given that Bank Negara Malaysia’s (BNM) international reserves as of August 2025 were only able to cover 4.8 months of import requirements and 0.9 times short-term external debt.

As of Oct 31, 2025, BNM’s international reserves amounted to US$123.8 billion (RM521.6 billion), above the international minimum adequacy threshold of three months, and 0.9 times the total short-term external debt.

The international reserves also remain adequate at 104% according to the IMF’s Assessment of Reserve Adequacy metric, which takes into account various aspects of reserve adequacy more comprehensively.

The MoF said the federal government’s external debt is small and remains low, at less than 3% of total foreign currency-denominated external debt.

“A large amount of the federal government’s external debt is denominated in ringgit, which is protected from currency risks,” he said.

MoF stressed that international reserves are not the only way to meet external obligations such as external debt repayment.

Following the gradual liberalisation of foreign exchange policies, it said Malaysian corporates and financial institutions have built up large holdings of non-reserve external assets, which can be used to meet financial commitments in foreign currencies without relying entirely on international reserves.

From an external resilience perspective, MoF said Malaysia also has a sizeable non-reserve foreign currency external assets. This underpins Malaysia’s positive net international investment position of RM77.3 billion, or 3.9% of GDP at the end of 3Q 2025.

“Therefore, Malaysia continues to maintain its position as a net creditor country,” MoF added.