BNM: DECENTRALISED RESERVES BOLSTER MALAYSIA’S EXTERNAL POSITION

KUALA LUMPUR, March 24 (Bernama) – Bank Negara Malaysia (BNM) said its long-standing policy of decentralising international reserves had led to the accumulation of sizeable non-reserve external assets, strengthening Malaysia’s external position.

The central bank said the country’s net foreign currency (FCY) external asset position stood at RM1.3 trillion, or 65.4 per cent of gross domestic product (GDP).

“Given this position, the appreciation of the ringgit against the US dollar and other major currencies resulted in a smaller increase in FCY external assets compared to FCY external liabilities,” it said in its Economic and Monetary Review 2024, released on Monday.

BNM added that FCY external assets held by banks and corporates, including their liquid portion, have amounted to RM945.9 billion. These assets can be drawn upon to meet short-term external debt obligations of RM575.4 billion without placing any claims on international reserves.

The central bank said its international reserves stood at US$116.2 billion (RM520.1 billion), sufficient to finance 4.9 months of imports of goods and services and amounting to 0.9 times the short-term external debt.

“Notwithstanding this, other means of meeting external obligations remain available and continue to be strengthened,” it said.

As at end-2024, Malaysia’s net international investment position (IIP) recorded a net external liability position of -RM6.7 billion, equivalent to -0.3 per cent of GDP.

This was due mainly to a larger increase in external liabilities of RM197.9 billion, primarily driven by higher foreign direct investment, BNM said.

“This more than offset the increase in external assets of RM67.5 billion, arising mainly from portfolio investments. Nevertheless, the increase in both external assets and liabilities was partially offset by exchange rate valuation effects, particularly due to the stronger ringgit against the US dollar,” BNM said.

Meanwhile, BNM said Malaysia faces the prospect of repositioning itself as a neutral and leading partner in the electrical and electronics (E&E) value chain.

“Therefore, Malaysia must be proactive in shaping the ongoing recalibration to maximise its benefits. To succeed on this path, the domestic E&E industry must shift its paradigm and enhance its capabilities to compete on a global scale,” it said.

BNM said that by building upon its mature ecosystem and existing strengths in assembly, testing, and packaging processes, there is a window of opportunity to pivot towards greater value creation in chip research and development, design and fabrication.

“Ultimately, creating a more dynamic and resilient domestic semiconductor ecosystem will not only enable Malaysia to withstand fluctuations in global tech cycles but also secure the country’s long-term economic growth prospects and prosperity for the rakyat,” it added.

BERNAMA