No choice but to face ring­git volatil­ity: Jo­hari

The Sun (Malaysia) - - MEDIA & MARKETING -

KUALA LUMPUR: Malaysia has no op­tion but to face the cur­rent volatil­ity of the ring­git while fo­cus­ing on en­hanc­ing its eco­nomic fun­da­men­tals, said Sec­ond Fi­nance Min­is­ter Datuk Jo­hari Ab­dul Ghani ( pix).

He said although Malaysia had pre­vi­ously pegged its cur­rency dur­ing the 1997 eco­nomic cri­sis, such a move, made by the for­mer prime min­is­ter Tun Dr Ma­hathir Mo­hamad then, is not prac­ti­cal now in an open global econ­omy as the coun­try will for­feit its eco­nomic growth.

Jo­hari said the govern­ment will not peg the lo­cal cur­rency or im­pose cap­i­tal con­trols de­spite its re­cent volatil­ity, and cer­tainly will not in­crease in­ter­est rates to at­tract for­eign in­vest­ments.

“Peg­ging it is not an op­tion in to­day’s econ­omy be­cause the world now has be­come so open ... even China, a coun­try that closed its econ­omy 20 to 30 years ago, has now opened its doors to the world.

“If we want to be a de­vel­oped coun­try we can­not peg our cur­rency, we can­not im­pose cap­i­tal con­trols be­cause if we do this now we will be left far be­hind and no one will in­vest here,” he said in his speech at the “Women Power Talk, Ef­fec­tive Net­work­ing the Way For­ward” pro­gramme here yes­ter­day.

Jo­hari said in­creas­ing in­ter­est rates to at­tract for­eign in­vestors also is never an op­tion as it will raise house­hold debt in this coun­try.

“(If we in­crease in­ter­est rates) the peo­ple will be af­fected as in­stal­ment pay­ments will in­crease, so we don’t have any op­tion ex­cept to go through this tran­si­tion,” he added.

Elab­o­rat­ing, Jo­hari said the fun­da­men­tal cause of the ring­git’s de­pre­ci­a­tion is be­cause Don­ald Trump was elected as the US pres­i­dent.

Dur­ing his pres­i­den­tial elec­tion cam­paign, Trump made quite a num­ber of rhetoric po­lit­i­cal state­ments and promised to fo­cus on a do­mes­tic-driven econ­omy, Jo­hari said.

“So, to do this (do­mes­tic-driven econ­omy) they need money, they need cash, they need funds. All these years, Amer­i­can in­vestors have in­vested over­seas and it is es­ti­mated that US$2 tril­lion-US$3 tril­lion of their in­vest­ments are in Asean coun­tries.

“In or­der to bring back this money, they will in­crease in­ter­est rates in the US and, when this hap­pens, our in­ter­est rates will be­come not so at­trac­tive,” said Jo­hari.

The de­cline of the ring­git was wors­ened by spec­u­la­tive ac­tiv­i­ties in the off­shore mar­ket, he said.

“Now the ring­git is un­der pres­sure, caus­ing the de­pre­ci­a­tion, and that is why our re­serves fell from US$170 bil­lion to US$97 bil­lion now as a lot of in­vestors leave,” he added. – Ber­nama

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.