KUALA LUMPUR: MARC Ratings has reaffirmed Sabah's sub-sovereign credit rating at AAA with a stable outlook, highlighting the state's significant fiscal reserves, robust revenue base from its rich natural resources and strong institutional framework.
Sabah's fiscal surpluses have resulted in consolidated funds amounting to RM5.4 billion in 2022, which is double the state's total debt.
"Sabah also has a solid revenue base, amounting to RM6.9 billion and constituting 5.7 per cent of gross domestic product (GDP) in 2022.
"Sabah's natural resource wealth, being among the top state producers of palm oil and petroleum, has been a significant revenue source for the state, particularly following the 2020 High Court verdict that permitted Sabah to impose new sales taxes on petroleum products," it said.
The ratings agency said the state's expanded tax base is expected to support its revenue and consolidated funds, with tax revenue increasing to RM3.8 billion in 2022 from RM1.2 billion in 2020.
However, it also mentioned that Sabah's credit strengths are tempered by its slow progress in economic diversification.
"Given the heavy reliance on commodity exports, Sabah's economic growth and fiscal position remain vulnerable to fluctuations in commodity prices and production."
MARC Ratings added that in the medium term, the continued recovery in tourist arrivals is expected to help offset the effects of weaker external demand and declining commodity prices.