Former Malaysian leader Mahathir Mohamad has warned Prime Minister Najib Razak against allowing the ringgit to be traded offshore, saying that currency traders should instead be locked up and jailed under the country’s draconian Internal Security Act that allows indefinite detention without trial.
“We must be careful and do proper review. US$4 billion is traded each day. What is the benefit to us, we do not see any prosperity from this trading. It does not boost our trade or our businesses. These people should be locked under the ISA. They are the ones responsible for the financial crisis,” Mahathir told reporters during his Hari Raya open house on Sunday.
Najib plays to the gallery
The former premier who ruled Malaysia with a fist of iron from 1981 to 2003 was responsible for the taking the ringgit off the overseas markets in 1998 in a bid to curb the brutal capital flight that followed the Asian financial crisis.
Mahathir's hugely unpopular move caught foreign investors wrong-footed. Unable to exit their investments, they incurred huge losses and have since refused to invest in a serious way in the country other than in short-term portfolio positions.
Although the central Bank Negara has recently allowed the settlement of offshore trade in goods and services in the ringgit, the feedback from the business community is that until the ringgit is fully trade-able both onshore and offshore, it would hamper’s Malaysia economic development.
On Saturday, in an interview with CNBC, Najib had said his government may consider allowing the ringgit to trade offshore. But few market practitioners were convinced he would actually de-regulate the currency any time soon.
"We are open to it. We are quite adaptive and if we think it's going to help us and the economy, we would review the situation," Najib said.
The Malaysian premier also said the ringgit, which traded at a 13-year high of 3.11 to the dollar on September 6, reflects the country's economic fundamentals.
"We are monitoring it in terms of both our fiscal and monetary policy to make sure that the ringgit reflects the fundamentals of the economy and at the moment, we believe it does and the stronger ringgit doesn't seem to have a negative impact on our exports," he added.
Mahathir is wrong
The strengthening ringgit comes on the back of strong economic growth in the first two quarters and a series of interest rate hikes by the central bank.
The Malaysian economy grew by 10.1 percent in the first quarter of the year and by 8.9 percent in the second quarter, with growth expected to exceed six percent in the full year, according to the central bank. Bank Negara also raised the overnight policy rate or OPR by 25 basis points to 2.75 percent in July, the third time this year.
"It is the interest rate rather than the GDP growth that is pushing the ringgit up. The yields on the ringgit have to be decent for traders to want to buy the currency. So we may see interest rates going up which is good for Malaysia because it will reduce speculation on property and also whittle down imported inflation," said a chief dealer at a large foreign bank.
"But we disagree with Mahathir. We don't think he is talking sense. It is time he moves with the rest of the world. What happened in 1997 was not due to the currency traders but because the governments themselves carried too much debt and this was due to all their mega-projects."
Last year, the central banks of China and Malaysia signed a currency swap agreement ease liquidity trouble as they boost the amount of yuan that Malaysian banks can draw on while servicing local companies that use the Chinese currency when trading.
- The Most Corrupted Malaysian
- THE TAIB CROWN JEWELS
- Anwar’s Acquittal – What Are The Hidden Messages?
- The difference between Rosmah and Imelda: Rosmah's handbag costs more
- Fairy-tale rise of Perak's princess in Malaysia's corporate world
- ‘PROGRESS AND DEVELOPMENT’ WHERE DID THE MONEY GO?
- Taib Mahmud: The Most Corrupted & Bastards Chief Minister
- BN pouring in RM80mil for 620 votes
- Malaysian PM caught up in murder, bribery scandal
- Why Najib has enough money for RM36bil MRT but not enough for civil servants' bonuses