KUALA LUMPUR: The situation surrounding 1Malaysia Development Bhd is not expected to have an immediate negative impact on Malaysia's sovereign ratings, says Fitch Ratings.
It believes there is an increasing likelihood that some of 1MDB’s debt will be formally assumed by the Malaysian government.
Sagarika Chandra, who is associate director, sovereign ratings, said 1MDB has been long viewed as a close contingent liability of the sovereign, which limits the downside for the rating from such an eventuality.
"More broadly, these developments reflect Malaysia’s relatively weak governance standards, which the agency has cited as a weakness in the credit profile."
Fitch will be monitoring for any signs of a significant, lasting impact from the affair on domestic or international investor confidence that could affect Malaysia’s economic performance, she said, in a statement.
"We will also be monitoring for any effect on Malaysia’s political stability or the ability of the government to implement appropriate economic policies and structural reforms.
"These developments could be negative for the ratings if they occurred”.