Moody's views govt RM6.2b aid to Felda as credit negative

The government will not interfere with the decision of the Federal Land Development Authority (Felda) to dispose of a 37% stake in PT Eagle High Plantation to the Rajawali Group.

KUALA LUMPUR: Moody's Investors Service views the Malaysian Government's financial aid of RM6.2bil (US$1.5bil or 0.4% of GDP) to Federal Land Development Authority (Felda) is credit negative.

The rating agency said on Thursday the financial assistance will add to the government’s debt burden, which is already significantly above the median of A-rated sovereigns.

“We estimate that the assistance will raise the government’s debt burden by 0.3% of GDP to 56.0% in 2019, substantially higher than median debt ratio for A-rated sovereigns of 37.8%  and up from 50.7% in 2017. 

“In our estimates, we include the debt of state-owned investment fund 1Malaysia Development Bhd (1MDB) and RM20bil of funding provided to Tabung Haji, the state-owned pilgrimage fund, at the end of last year through an asset-backed sukuk,” it said.

Moody's cautioned that a higher debt burden will weigh on Malaysia's debt affordability, particularly because the share of revenue to GDP, at 16.3% in 2018, is likely remain at or near record lows. 

“Interest payments account for 13.3% of revenue, significantly higher than the A-rated median of 4%,” it said.