Malaysia PM says econ­omy sound, as fears mount

The Pak Banker - - BUSINESS -

Prime Min­is­ter Na­jeeb Raz­zak said on Thurs­day that Malaysia's econ­omy was on a sound foot­ing, seek­ing to as­suage grow­ing public and in­vestor fears over the na­tion's plum­met­ing cur­rency and slow­ing growth.

"Malaysia's fi­nan­cial sys­tem re­silience re­mains in­tact," Na­jeeb said, ac­cord­ing to a state­ment from his of­fice. Na­jeeb, who is also fi­nance min­is­ter, added that the plung­ing ring­git would not be pegged against the green­back to stem its de­cline, a step taken in the late 1990s amid an ear­lier pre­cip­i­tous fall. The ring­git is Asia's worst-per­form­ing cur­rency over the past year. It be­gan fall­ing ini­tially on con­cerns that the world slump in oil prices will harm eco­nomic growth in oil-ex­port­ing Malaysia. But mar­ket sen­ti­ment also has been hit by po­lit­i­cal un­cer­tainty stem­ming from cor­rup­tion con­cerns that have ex­ploded fol­low­ing the rev­e­la­tion last month that hun­dreds of mil­lions of dol­lars have been put into Na­jeeb's per­sonal bank ac­counts since 2013.

China's sur­prise de­val­u­a­tion of the yuan last week also has pres­sured the ring­git. The ring­git was at 4.12 to the dol­lar (Dh3.67) in Thurs­day trade, its low­est level since 1998, when Malaysia im­posed a peg of 3.8 to the dol­lar dur­ing a re­gional fi­nan­cial cri­sis. It lasted seven years.

Na­jeeb said there would be no cur­rency peg or other cap­i­tal con­trols this time, cit­ing Malaysia's "strong fun­da­men­tals and sig­nif­i­cantly dif­fer­ent en­vi­ron­ment" to­day. He added that on­go­ing diver­si­fi­ca­tion of the econ­omy would help buf­fer it from the oil­price shock. Malaysia's econ­omy grew 4.9 per cent in the sec­ond quar­ter, its slow­est pace in nearly two years. The scan­dal over the nearly $700 mil­lion re­vealed to have been trans­ferred to Na­jeeb's bank ac­counts is the big­gest cri­sis of his six-year ten­ure.

Na­jeeb ini­tially de­nied the al­le­ga­tion, first ex­posed by a Wall Street Jour­nal in­ves­tiga­tive re­port. But Malaysia's anti- graft agency and Na­jeeb's cab­i­net min­is­ters have since ad­mit­ted he re­ceived the money, say­ing it was from uniden­ti­fied Mid­dle Eastern "donors", but pro­vided no other de­tails.

An­a­lysts say con­cerns over that, as well as mas­sive debt and al­leged fi­nan­cial ir­reg­u­lar­i­ties at a sta­te­owned in­vest­ment firm linked to Na­jeeb, have shaken in­vestor con­fi­dence. "The fall­ing con­fi­dence from for­eign in­vestors and the drama from po­lit­i­cal un­cer­tainty and fi­nan­cial mis­man­age­ment al­le­ga­tions cer­tainly casts a pall over Malaysia's long-term eco­nomic plans," IG Mar­kets strate­gist Bernard Aw said. Na­jeeb "needs to shore up con­fi­dence do­mes­ti­cally, which might be a tall or­der," he said.

Bloomberg News re­ported in July that $3 bil­lion (Dh11 bil­lion) in for­eign funds have been pulled from the coun­try this year.

Mean­while, Na­jeeb Raz­zak said that he would not peg the ring­git cur­rency to the US dol­lar or im­ple­ment cap­i­tal con­trols. "The flex­i­bil­ity of our ex­change rate is im­por­tant to ab­sorb global ad­just­ments and volatil­ity," he said in a state­ment. Sep­a­rately, Malaysian cen­tral bank Gover­nor Zeti Akhtar Aziz said for­eign ex­change re­serves had fallen but it was not a cause for worry. "We've seen it de­crease be­fore and there's no is­sue to be con­cerned be­cause that's what the re­serves are there for, to rep­re­sent a buf­fer to ad­just dur­ing such pe­ri­ods," she told re­porters.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.