Malaysia has no need to seek IMF bailout: Analysts

Malaysia has no need to seek IMF bailout: Analysts

KUALA LUMPUR (AFP): Malaysia has no need to seek assistance from the International Monetary Fund (IMF) as its exchange reserves and short-term debts are still at manageable levels, analysts said yesterday.

But the country may have to seek soft loans from individual countries to ease problems arising from its ailing currency and fears that corporations may not be able to meet their foreign debt obligations, they said.

Simon Flint, regional economist at Singapore-based research house IDEA, said Malaysia was "not even significantly closer" to seeking IMF help.

"I must stress that all those countries under IMF tutelage have a serious balance of payments imbalance ... Malaysia doesn't," Flint told AFX-Asia, a financial news wire affiliated to AFP.

Although the Bank for International Settlements (BIS) recently revealed that Malaysia has a surprisingly large amount of short- term debt, the country has sufficient reserves to cover it, he said.

In a recent report on national debt levels, the BIS said foreign bank loans to Malaysia rose 43 percent year-on-year to 28.8 billion dollars as of June last year.

Flint said the IMF stance was to address the overall balance of payments side but "Malaysia is in need of liquidity to help the export and export supporting industries."

Sani Hamid, emerging markets analyst at MMS International in Singapore, agreed that Malaysia was unlikely to seek an IMF bailout.

There was not "that big a foreign debt, unlike Indonesia, Thailand and Korea who have large debts maturing and creditors not rolling over (the loans)," Sani said.

"That there will be corporate failures is a certainty; the question now is -- how many will go under," he added.

Indonesia, Thailand and South Korea have all received multi- billion-dollar IMF-led bailouts in recent months to overcome a severe financial crunch.

One senior economist at a local brokerage who declined to be named said Malaysia was unlikely to need IMF assistance to bail out local companies.

"I don't think that our problems will be solved even if we go to the IMF for help. An IMF package would drive the economy into a recession... corporate earnings will also come down drastically," he said.

"Maybe by going to IMF, we will be able to restore some confidence but I think it will only be a temporary thing," he said, adding that the ringgit's slide to below four to a dollar should not cause any alarm as other regional currencies have also simultaneously weakened.

He said Malaysia's government external debt at the end of September was 10. 9 billion ringgit (US$2.5 billion), with the total for the year estimated at 11 billion to 12 billion ringgit.

A Singapore-based economist said Malaysia's foreign currency debt comprised a small percentage of its gross domestic product while its external debt problem dwarfed in comparison to countries that have sought IMF help.

But he said Malaysia faces a huge domestic debt burden as a result of excessive lending. "Although Bank Negara has taken steps to curb lending, loans growth is not slowing down fast enough," he warned.

Multinational corporations such as Tenaga Nasional Bhd. and Telekom Malaysia Bhd. may face difficulties in servicing their Eurobond obligations but the problem was not widespread, the economist said.

On the other hand, the federal government has a cleaner bill of health, having pre-paid external debt over the past couple of years.