‘No need to raise OPR to counter weak ringgit’

There is no need to raise the interest rate as an immediate measure to address the weakness of the ringgit, said analysts.

Raising the Overnight Policy Rate (OPR) will only worsen the situation as financing costs become more expensive and may hinder economic growth, they added.

The weakening of the ringgit against the US dollar and regional currencies is influenced by external factors that are beyond Malaysia’s control.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said for now, the ringgit is facing a weak sentiment following the move by the People’s Bank of China to cut its loan rate and the slim probability of the US interest rate being reduced in March, thus strengthening US dollar.

He said there is no guarantee that raising the interest rate will strengthen the ringgit.

He said it is not Bank Negara Malaysia’s policy to use the OPR to control the movement of the ringgit.

Afzanizam suggested the government should focus on efforts to restructure the economy and stimulate the confidence of foreign investors to continue investing in the country.

“The implementation of economic reforms such as subsidy rationalisation, industrial liberalisation, improvement of the tax system and pensions, among others, need to be clearly communicated and implemented gradually.

“This is to avoid unnecessary confusion and shock to the public. Therefore, it will take a long time if we want to deal with the weakness of the ringgit. Otherwise, we will only worsen the situation when policies are not implemented at the right speed and not coordinated.”

UniKL Business School economic analyst Associate Prof Dr Aimi Zulhazmi Abdul Rashid said in order to strengthen the ringgit, coordination and cooperation at the government level is crucial.

He suggested the establishment of a committee from the Prime Minister’s Department, the Finance Ministry, Bank Negara and governmentlinked investment companies to take action.

Citing an example, he said at least 80 per cent of the country’s total export revenue must be converted into the ringgit.

Foreign investments must also be converted into the ringgit to strengthen the currency.

“Next, reduce the import of food items, provide incentives for local produce, reduce corporate tax from 24 per cent to attract foreign investment and give tax breaks to domestic investors.

“The next step that can be taken is to increase the amount of spending on the tourism sector so that more foreign tourists will visit Malaysia.”

On the weak ringgit compared to regional currencies such as the Singapore dollar, the Indonesian rupiah and the Thai baht, Tun Abdul Razak University’s Graduate School of Business Studies lecturer Prof Emeritus Dr Barjoyai Bardai said it is likely that the country’s reserves in the US dollar are smaller than neighbouring countries.

He said in Thailand, the “tourist dollar” factor is supportive of the baht, while in Indonesia, the amount of long-term foreign investment is higher than Malaysia.

In Singapore, US dollars are kept as reserves.

“So right now, the government should focus on developing and driving the economy. Then foreign investors will come in,” he added.