Malaysia's international reserves rose in the first two weeks of September in a welcome boost to the country's weakened external position, indicating the central bank may have eased off slightly from defending an embattled ringgit currency.
Currency reserves increased to US$95.3 billion (RM409 billion) as of September 15, Bank Negara Malaysia (BNM) said today, from US$94.7 billion on August 28.
In a statement, BNM said the reserves are sufficient to finance 7.3 months of retained imports, and are 1.1 times the short-term external debt.
Malaysia's reserves have shrunk by 21% or US$25.4 billion this year as its currency, the ringgit, depreciated over 18% against the greenback – the worst performing Asian currency this year.
Economists expect the US Federal Reserve's decision on Thursday to hold off on hiking interest rates to ease the pressure on Malaysia's reserves due to receding risks of a rush of fund outflows.
The ringgit, which closed at 4.2940 on Tuesday, has weakened slightly against the dollar since the Fed's decision.
In an effort to restore confidence in local markets, Malaysia's Prime Minister Datuk Seri Najib Razak announced economic measures last week of RM20 billion to prop up the country's ailing stock market following foreign investors' move to pull out of the local bourse.
Malaysia, a gas exporter, has seen a deteriorating trade balance from soft commodity prices, which contributed to the ringgit's decline. It also faces a political crisis, with Najib's leadership in question after alleged graft, which he denies.
Najib is also the chair of 1Malaysia Development Berhad's (1MDB) advisory board, a state fund which has been dogged by controversy over its US$11 billion debt and alleged financial mismanagement.
The scandal surrounding the fund has rattled investors confidence and a series of local and international investigations has added to the uncertainty.
Earlier this year, Malaysia revised its growth outlook downward from between 5% to 6%, to between 4.5% to 5.5%. Economists expect Malaysia to achieve 5.0% growth this year. – Reuters, September 22, 2015.