Kuala Lumpur: Decentralised reserves have strengthened Malaysia’s external position due to its policy of accumulating sizeable non-reserve external assets.
According to BERNAMA News Agency, the central bank stated that Malaysia’s net foreign currency (FCY) external asset position is RM1.3 trillion, equating to 65.4 percent of GDP. The appreciation of the ringgit against the US dollar and other major currencies has caused a smaller increase in FCY external assets compared to FCY external liabilities, as outlined in the Economic and Monetary Review 2024.
BNM reported that the FCY external assets held by banks and corporations, including their liquid portions, amount to RM945.9 billion. These assets could be utilized to meet short-term external debt obligations of RM575.4 billion without impacting international reserves. The central bank’s international reserves currently stand at US$116.2 billion (RM520.1 billion), enough to support 4.9 months of imports and equal to 0.9 times the short-term external debt. BNM highlighted that other methods to meet external obligations remain available and are being strengthened.
As of the end of 2024, Malaysia’s net international investment position (IIP) recorded a net external liability position of -RM6.7 billion, which is -0.3 percent of GDP. This primarily resulted from a larger increase in external liabilities of RM197.9 billion, driven by higher foreign direct investment. This increase in liabilities more than offset the rise in external assets of RM67.5 billion, which mainly stemmed from portfolio investments. The increase in both external assets and liabilities was partially mitigated by exchange rate valuation effects, notably due to the stronger ringgit against the US dollar.
BNM also noted Malaysia’s potential to reposition itself as a neutral and leading partner in the electrical and electronics (EandE) value chain. The central bank emphasized the need for Malaysia to proactively shape the ongoing recalibration to maximize benefits. For this strategy to succeed, the domestic EandE industry must enhance its capabilities to compete globally.
BNM suggested leveraging Malaysia’s mature ecosystem and strengths in assembly, testing, and packaging processes to create value in chip research and development, design, and fabrication. Strengthening the domestic semiconductor ecosystem would help Malaysia withstand global tech cycle fluctuations and secure long-term economic growth and prosperity for its citizens.