MARC Ratings has affirmed Sarawak’s sub-sovereign credit rating at AAA with a stable outlook, based on the rating agency’s sub-sovereign rating scale. This is an unsolicited rating based on public information. The affirmation reflects Sarawak’s fiscal flexibility, substantial consolidated funds that provide exceptional debt coverage, and strong political representation.
Sarawak’s revenue as a percentage of gross domestic product (GDP) averaged 6.7% over 2020 to 2024, the highest among Malaysian states, with oil and gas–related revenues contributing around half of total state revenue. Beyond petroleum-related taxes, the state has broadened its fiscal base through export taxes on timber, ferroalloys and polysilicon, as well as a carbon levy on the energy sector from 2026. The doubling of special interim payments to RM600 million per annum in 2025 and 2026 adds near-term revenue stability, pending conclusion of ongoing fiscal negotiations. The state’s fiscal strength is anchored by the Malaysia Agreement 1963 (MA63), which grants the state revenue-raising authority unavailable to Peninsular Malaysian states. These factors have enabled the state to record fiscal surpluses in eight of the 10 years between 2015 and 2024.
Accumulated from years of fiscal surpluses, Sarawak’s consolidated funds stood at RM20.7 billion in 2024, equivalent to 11.2% of the state’s GDP and the largest reserve position among Malaysian states. These funds cover outstanding debt (RM1.8 billion) by more than 11 times, underscoring an exceptional liquidity position.
Furthermore, Sarawak’s political representation remains strong. The Gabungan Parti Sarawak coalition holds a two-thirds supermajority in the state legislature and 31 of 222 federal parliamentary seats. As such, the coalition forms the largest single-state bloc in the Dewan Rakyat and holds ministerial and deputy prime ministerial portfolios. This provides considerable leverage in federal-state negotiations and supports continued MA63 implementation, including greater fiscal autonomy, the authority to introduce new taxes, and more flexibility to borrow externally.
As Sarawak continues to develop its economy, addressing socioeconomic disparities remains a priority. Despite holding World Bank high-income status since 2022, the state’s absolute poverty rate of 8.4% in 2024 is the fourth highest nationally and above Malaysia’s poverty rate of 5.1%. Median monthly household income also trails the national median. Income inequality, as measured by the Gini index, ranks fourth highest among Malaysian states, though it has declined in recent years. Continued investment in rural development, higher-skill employment, and human capital is expected to narrow these gaps over time.
The stable outlook reflects MARC Ratings’ expectation that Sarawak will maintain its strong liquidity position and fiscal discipline, supported by diversified revenue mobilisation and continued MA63 implementation. However, the state remains sensitive to global energy prices, as a sustained decline could lead to prolonged fiscal deficits and negatively pressure its credit profile.