[RAM] RAM Ratings assigns AAA(s) rating to Saracap Ventures's MTN Programme

RAM Ratings has assigned the rating of AAA(s)/Stable to Saracap Ventures Sdn Bhd’s (Saracap Ventures or the Issuer) Medium-Term Notes Programme of up to RM1.85 bil in nominal value (MTN). Saracap Ventures is a funding vehicle of the Sarawak government through wholly owned subsidiary, Saracap Holdings Sdn Bhd. 

Based on our evaluation of the transaction structure, the financing documents and representations from the State Financial Secretary, the Sarawak government has committed to set aside funds from its annual budget for the servicing and repayment of the MTN. Hence, the AAA(s)/Stable rating of the MTN Programme is equated to Sarawak’s credit strength.

Sarawak’s strong credit profile is supported by its substantial financial reserves, robust performance and prudent fiscal management. An expected increase in Sarawak’s debts to facilitate infrastructure development and finance strategic investments in the medium term will be balanced by anticipated higher revenue generation. The rating is also anchored by Sarawak’s strong economic importance given its sizeable share of Malaysia’s natural gas and crude oil, and its significant political standing at the federal government. Despite Sarawak’s strong financial capacity, infrastructure and human capital development gaps remain key weaknesses. 

For 2024 and 2025, Sarawak’s GDP growth is expected to improve to between 5% and 6%, backed by recovery in global trade and domestic demand (2023: 1.2%). The Sarawak government projects 2024 to be another record year for revenue collection, estimating an increase of 6.8% to RM14.2 bil (2023: RM13.3 bil). The fiscal surplus for 2024 is projected at approximately RM1.5 bil (10.4% of revenue). Looking ahead to 2025, revenue is forecasted to stay at RM14.2 bil despite lower crude oil prices, supported by a larger interim Special Grant from the federal government. While the operating surplus will remain stable at around RM9.3 bil, appropriations to statutory funds for development expenditure are expected to grow 12.8% to RM8.8 bil (2024: RM7.8 bil), resulting in a lower projected fiscal surplus of RM486 mil.

Sarawak continues to maintain the largest reserves among all Malaysian states, providing it substantial  financial resilience and stability. Bolstered by robust fiscal surpluses after the end of the COVID-19 pandemic, Sarawak's reserves increased by 13% to RM26.9 bil by the end of 2023 (end-2022: RM23.7 bil). The reserves are expected to decline to around RM20.7 bil as at end-2024, as RM8 bil was appropriated into the Sarawak Sovereign Wealth Future Fund (SSWFF). SSWFF aims to safeguard Sarawak’s financial resources for future generations and the funds will be strategically invested for long-term growth. As Sarawak is ultimately the legal beneficiary to the funds held by SSWFF, RAM will treat these investments as part of Sarawak’s contingent reserves in our liquidity assessment.


Analytical contacts
Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my

Ben Inn
(603) 3385 2510
ben@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my