RAM Ratings reaffirms AAA rating of Sabah State Government's bonds

Published on 05 September 2011
RAM Ratings has reaffirmed the AAA rating of the Sabah State Government’s (State Government) RM544 million Bonds (2009/2014) (the Bonds); the long-term rating has a stable outlook. The rating reflects Sabah’s rich natural wealth that remains key to spurring its economic growth and the State Government’s strong revenue-adjustment capacity, its healthy fiscal position, and supportive relationship with the Federal Government. These strengths balance the challenge of unlocking Sabah’s long-term development potential.

Given the wider taxation rights conferred exclusively to the East Malaysian states under the Federal Constitution, Sabah has traditionally generated robust revenues and strong fiscal surpluses. This remained status quo in 2010, when Sabah recorded a fiscal surplus of RM730.3 million on the back of RM4.2 billion of revenue. As at end-2010, the State’s cash balances summed up to RM2.8 billion against its RM3.1 billion debt load.

Sabah’s primary sector helps ensure that the State maintains its strategic position within the national economy, as a major contributor to the production/export of Malaysia’s 2 main commodities, i.e. palm oil (roughly 30% of the country’s total production) and crude petroleum (approximately 25% of the nation’s exports). The tourism sector – which forms part of the State’s tertiary sector - also remains a key economic contributor.

Despite its natural resources, Sabah still lags behind its national peers in overall development. The State has high levels of unemployment and poverty, which are duly noted by both the Federal and State Governments; both parties are attempting to address this issue via short-, medium- and long-term development plans. These include the Tenth Malaysia Plan and the Sabah Development Corridor, as well as the State’s own Halatuju Pembangunan dan Kemajuan Negeri Sabah.

Media contact
Ramnath Sundaram
(603) 7628 1074
ramnath@ram.com.my