KUALA LUMPUR, July 21 — A white paper by the Economist Intelligence Unit (EIU) has outlined indications that Malaysia is expected to score well on five out of eight key sovereign risk indicators for selected Asian emerging markets.

EIU offers insight and analysis of the economic and political developments in the increasingly complex global environment, identifying opportunities, trends, and risks on a global and national scale.

In the EIU analysis, it said that Malaysia’s foreign currency-denominated public debt to the gross domestic product (GDP) for 2022/23 was less than 10 per cent versus that of Cambodia, Laos, Mongolia, Pakistan and Sri Lanka which were more than 30 per cent.

The report highlighted in a chart that Malaysia’s debt-to-service ratio for 2022/23 was also less than 10 per cent, the country’s significant off-budget liabilities were also categorised as "small”, while Malaysia’s average annualised current account balance as a percentage of 2022/23 GDP is in surplus.

The paper also said that Malaysia’s access to external concessional financing during a crisis is also good.

The report was released following concerns about emerging markets’ sovereign debts as a result of the US and other major Western countries’ tightening monetary policy.

Its senior analyst John Marrett said Asia’s future sovereign debt looks comparatively safe against regions such as sub-Saharan Africa and Latin America, but there are a few concerning cases tied to a stronger US dollar and pandemic-related disruption to external sectors.

"Higher commodity prices in the region have pushed many economies into more vulnerable positions, but a reversal of this trend — declining commodities prices — could expand risks for another set of countries. In other words, there is no easy way out of financial vulnerability for many in the region given the damage already inflicted by the pandemic,” he said.

The upward trend in global rates is pushing up the price of borrowing, while a stronger US dollar is increasing the cost of external repayment for governments. Rising inflation is also compounding the issue by pushing national authorities to provide additional fiscal relief before many have managed to rein in budget deficits that ballooned during the Covid-19 pandemic.

The report also said rising rates have pushed up borrowing costs, while higher inflation is putting pressure on governments to provide additional fiscal relief.

In Sri Lanka and Pakistan, the report said both countries are already on a high-risk path before the pandemic.

The sovereign key indicators highlighted that Pakistan’s scores in four indicators, namely fiscal deficit, public debt to GDP, foreign currency-denominated public debt to the GDP and foreign exchange reserves as a percentage of external financing requirement were alarming, while Sri Lanka showed a negative performance in six out of eight indicators.

"Among Asian countries, Mongolia and Laos are the most likely to experience default between 2022 and 2026, with Laos at very high risk in the near term. However, the government in Laos is unlikely to declare this as an official public debt default.

"The composition of creditors for emerging-market sovereigns has changed significantly in recent years. This brings about the prospect of prolonged restructuring processes, which can result in longer periods of economic pain, as we expect for Sri Lanka in 2022-23,” it added. — Bernama