KUALA LUMPUR – Malaysia raised US$1.5 billion (S$1.9 billion) in its first dollar bond sale in five years, bolstering funding as the South-east Asian nation grapples with a fuel subsidy bill that is likely to more than double from an initial goal due to the Iran war.
The government sold Islamic securities, or sukuk, in two parts to help fund projects including infrastructure as well as refinance existing obligations. It priced a US$850 million note due in April 2032 to yield 4.612 per cent and sold a US$650 million tranche maturing in July 2036 to yield 4.949 per cent.
Malaysia said the bonds were 4.7 times oversubscribed, with the strong demand allowing the government to tighten final pricing by 30 basis points from the initial price, recording the tightest ever spreads for the country’s global sukuk offerings.
“The strong oversubscription with the tightest ever spreads, reflects global investors’ continued confidence in Malaysia’s economic prospects and policy credibility,” Second Finance Minister Amir Hamzah Azizan said in a statement on July 24.
Malaysia’s economic growth has surpassed expectations in recent quarters as robust domestic demand, a surge in investment tied to semiconductors and artificial intelligence and electronics exports countered the impact of the war in the Middle East.
Gross domestic product rose 5.8 per cent in the three months through June from a year earlier, beating expectations.
The nation’s return to the dollar bond market comes amid growing global uncertainties with US President Donald Trump threatening to step up strikes on Iran. The US will also be collecting new levies from most major trading partners as the Trump administration rebuilds its tariff wall.
The Malaysian government has warned that it may not meet its fiscal deficit targets for 2026 as elevated global oil prices have swelled its fuel subsidy bill due to disruptions caused by the Middle East conflict.
Prime Minister Anwar Ibrahim said in June that Malaysia’s spending on petrol and diesel subsidies could climb to 40 billion ringgit (S$12.6 billion) in 2026 if current market prices persist. That is more than double the 15 billion ringgit allocated for subsidies in the 2026 budget.
The government will present its budget for 2027 in early October, according to local daily The Star. BLOOMBERG
