Global Courant
KUALA LUMPUR – Malaysia’s finance ministry said on Tuesday it would implement a structural policy aimed at boosting the inflow of funds and foreign investment that could support the ringgit, reiterating that it has no plans to transfer the currency to the U.S. dollar link.
The ringgit is down 5.4 percent year-to-date, trading at 4.6380 against the dollar on Tuesday, a new seven-month low and close to its lowest level since January 1998.
In 1998, during the Asian financial crisis, Malaysia imposed capital controls and pegged the ringgit to the dollar at 3.8000, maintaining the peg until 2005.
It said last year it would no longer do so, citing the risk of capital outflows.
Malaysia was at risk of losing its monetary policy independence and might have to raise interest rates to offset high borrowing costs in the United States if it pegged the currency again, Deputy Finance Minister Ahmad Maslan told the Senate on Tuesday.
“People are already struggling (with the current interest rate level),” he said.
Malaysia’s central bank, Bank Negara Malaysia (BNM), unexpectedly raised its benchmark interest rate last month, citing the need to contain ongoing inflation amid robust domestic demand.
The government would instead focus on improving Malaysia’s investment climate and productivity, as well as implementing fiscal sustainability measures that can attract quality foreign investment, Datuk Seri Ahmad said.
BNM would also try to reduce volatility in the foreign exchange market, including through the use of hedging instruments, he said.
The central bank said this month that Malaysia needed structural reforms to bolster growth prospects and encourage more investment opportunities to boost the ringgit. REUTERS
