MARC Ratings assigns AA+ credit rating to Perak, cites low debt, healthy reserves

The Sun

20-07-2025

PETALING JAYA: Malaysian Rating Corporation Bhd (MARC Ratings) has assigned a sub-sovereign credit rating of AA+ with a stable outlook to Perak, based on its sub-sovereign rating scale.
The rating, although unsolicited, reflects the state's prudent fiscal management, its strong commitment to strategic, development-focused spending, and a notably low debt burden – all supported by healthy reserve levels.
'The stable outlook reflects our expectation that Perak will continue to uphold disciplined fiscal practices, maintain high levels of development investment, and preserve its low debt and strong reserves,' MARC Ratings said in a statement.
'The successful execution of its economic and social development strategies could further strengthen its credit profile over time.'
Perak has consistently demonstrated sound fiscal management, maintaining a near-balanced fiscal position even while allocating a significant portion of its budget – averaging over 30% between 2019 and 2023 – to development spending, the rating agency said.
Over the same period, the state's total revenue grew at a compound annual rate of 2.6%, slightly outpacing its operating expenditure growth by 0.2 percentage point. This enabled Perak to maintain a balanced fiscal position while pursuing its development objectives.
A key revenue driver has been the steady increase in tax collections, primarily from quitrent and royalties.
In 2023, tax revenue accounted for 46.1% of total income, significantly exceeding both national and peer medians.
Perak contributed 5.3% to Malaysia's real gross domestic product (GDP) in 2023, positioning it as a mid-sized contributor to the national economy. The state's GDP growth closely mirrored its revenue growth, averaging 2.5% annually from 2019 to 2023.
Looking ahead, MARC Rating noted that while Perak's financial management remains sound, operating expenses are expected to rise due to planned increases in civil servant salaries and pension adjustments.
In anticipation, the Perak government has budgeted for a deficit in 2025. However, the state is expanding its revenue-generating initiatives, which are expected to improve its fiscal standing over time.
Perak maintains a conservative debt profile. It has not undertaken any new borrowings since 2016 and has maintained a solid debt servicing record.
As of 2023, Perak's outstanding debt stood at RM159.8 million, the third lowest among Malaysian states, behind only Penang and Selangor. Between 2019 and 2023, Perak recorded an average debt-to-GDP ratio of just 0.2% and a debt-to-revenue ratio of 17.3%, both of which are well below the national and peer medians.
Meanwhile, the state's consolidated funds increased to RM1.5 billion in 2023, up from RM1.3 billion in the previous year. The reserves covered 126.2% of annual expenditure and exceeded the state's outstanding debt several times over, offering ample fiscal flexibility and shock absorption capacity for future capital investments and economic initiatives.
MARC Ratings also highlighted Perak's political landscape, which has seen alternating ruling coalitions in recent elections.
While smaller development projects can be completed within a single administrative term, larger, multiphase initiatives – such as the Lumut Maritime Industrial City and Silver Valley Technology Park – would benefit from greater political continuity.
'Conversely, any significant shifts in development priorities or weak socioeconomic outcomes could introduce downward pressure on the rating,' the agency warned, emphasising the need for strategic consistency and long-term policy focus to translate development plans into meaningful economic progress.