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.
“In our estimates, we include the debt of state-owned investment fund 1Malaysia Development Bhd 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. “Interest payments account for 13.3% of revenue, significantly higher than the A-rated median of 4%,” it said.To recap, on April 10, the government announced it would provide the RM6.2bil financial aid to Felda.
The government plans to spread its aid over seven years. Felda will raise about half of this, which will be backed by government guarantees, while the remainder will come from loansFelda was established in 1956 to manage the resettlement of the rural poor and employ them in Malaysia's palm oil industry, but it has evolved into a financially independent statutory body supporting broader socio-economic development.
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