Not all Malaysia's external debt is created equal

Malaysia's external debt metrics have worsened most notably since 2007. This has, however, been more driven by Malaysia's rise as a key component inmost international bond benchmark indices, which led to a spike in foreign ownership of its local-currency bonds. While this still counts as external debt exposure - as the foreign owners could in theory exit the country, pulling foreign reserves out with them - this is not a likely scenario, states Standard Chartered. Many investors are long-term realmoney investors, or sovereign- or quasi-sovereign investors. 

Standard Chartered says, "We would be more concerned if the rise in external vulnerability was due to increased short-term USD funding for long-term local-currency investment".

This was the so-called 'original sin' that caused so much pain in the Asian 1997 crisis. In this light, Malaysia's ratio of foreign-currency denominated external debt does not appear high at 47% of total external debt.