MARC Ratings has assigned a sub-sovereign credit rating of AA+ with a stable outlook to the state of Perak, based on the rating agency’s sub-sovereign rating scale. The rating is unsolicited. This rating reflects Perak’s prudent fiscal management, its commitment to strategic, development-oriented spending, and a commendable low debt burden, all of which are significantly bolstered by healthy reserve levels.

Perak has consistently demonstrated robust fiscal discipline, maintaining a near-balanced fiscal position despite allocating a substantial share of expenditure to development, averaging above 30% between 2019 and 2023. During the same period, total revenue grew at a compound annual growth rate of 2.6%, outpacing operating expenditure growth of 2.4%, enabling the state to sustain fiscal balance while advancing its development goals. A key revenue driver has been the steady rise in tax collections, particularly from quit rent and royalties, which lifted tax revenue to 46.1% of total income in 2023, well above both national and peer medians. As a mid-sized contributor to Malaysia’s economy at 5.3% of national real gross domestic product (GDP) in 2023, Perak’s GDP growth has kept pace with revenue growth, averaging 2.5% annually from 2019 to 2023.

Looking ahead, while Perak has recorded sound financial management, operating expenditures are expected to rise from planned civil servant salary increases and pension adjustments. In response, the Perak state government has budgeted for a deficit in 2025, although continued expansion in revenue initiatives is expected to improve the fiscal position over time.

Overall, the state has a conservative debt profile. Perak has not incurred any new borrowings since 2016 and has maintained a consistent debt servicing record. Its outstanding debt stood at RM159.8 million in 2023, the third lowest among Malaysian states, behind only Penang and Selangor. Debt metrics have consistently outperformed national and peer medians, with an average debt-to-GDP ratio of just 0.2% and a debt-to-revenue ratio of 17.3% between 2019 and 2023. Meanwhile, consolidated funds rose to RM1.5 billion in 2023 (2022: RM1.3 billion), covering 126.2% of annual expenditure and multiple times the state’s outstanding debt, offering substantial shock absorption capacity and fiscal flexibility for future capital investments and economic initiatives.

Of note, the state has experienced alternating ruling coalitions in recent elections; while smaller development projects can often be efficiently executed within a single administrative term, larger, multi-phase initiatives such as the ambitious Lumut Maritime Industrial City (LuMIC) and the Silver Valley Technology Park (SVTP) would benefit from greater political continuity.

The stable outlook reflects our expectation that Perak will continue to uphold its disciplined fiscal practices and maintain its high level of development investment while preserving its low debt and strong reserve position. Successful execution of its economic and social development strategies could further strengthen its credit profile over time. Conversely, any material shifts in development priorities or underperformance in socioeconomic outcomes may introduce downward pressure on the rating, underscoring the importance of sustained strategic focus and policy continuity to translate developmental projects into economic growth.