BERNAMA – In dealing with the weakness of the ringgit to the United States (US) dollar, Malaysian Deputy Finance Minister Ahmad Maslan yesterday said the government maintains its position to not peg the ringgit due to the adverse effects it will have on the public.
Ahmad said pegging the ringgit would cause Malaysia to lose the ability to continue its monetary policy.
This would force the country’s central bank, Bank Negara Malaysia (BNM), to raise the Overnight Policy Rate (OPR) to the same level as the US’ interest rate which is currently at the threshold of five per cent to 5.25 per cent, he added.
“The people already feel ‘uncomfortable’ with the OPR at three per cent, what more if it is increased to 5.25 per cent,” said Ahmad during an oral question and answer session at the Upper House of parliament.
He was replying to an additional question from senator Shamsuddin Abd Ghaffar who wanted to know if the government would peg the ringgit.
Ahmad said Malaysia would need high international reserves to maintain the pegging at the set value.
He stressed that in an uncertain global financial market, the flexible ringgit exchange rate plays an important role as an external shock absorber while reducing the impact on domestic economic activities.
Therefore, the government remains committed and focussed on implementing structural policies that are able to increase economic growth and the country’s competitiveness to attract inflows of funds and foreign investment that will support the ringgit.
This includes policies to improve Malaysia’s investment climate and productivity through the implementation of the New Investment Policy (NIP).
The NIP outlines significant strategies to reinvigorate and catalyse Malaysia’s investment ecosystem, then-International Trade and Industry Minister Mohamed Azmin Ali was quoted by local media as saying in October last year.
Ahmad told Parliament yesterday the government will also ensure that fiscal sustainability and a stable macroeconomic situation are maintained by formulating a robust, prudent and clear medium-term fiscal policy such as the Fiscal Policy, Fiscal Responsibility Act (FRA) which will be presented to Parliament soon.
BNM will also adopt an approach to ensure that the ringgit level is in order, he added.
