The Deputy Finance Minister, Steven Sim, has stated that Putrajaya has no plans to peg the ringgit or impose exchange rate controls, despite the challenges faced by the country. Sim argued that this would not be the best solution because the Malaysian economy and financial system are strong enough to handle fluctuations in the global financial markets and exchange rate.
If Malaysia were to peg the ringgit against a specific currency, such as the US dollar, it would also have to adjust interest rates according to that currency. Sim highlighted that this could add cost pressure to the people. It would also require Malaysia to maintain large international reserves to support the pegged currency. Alternatively, reintroducing capital controls would be necessary to prevent speculative pressure on the ringgit.
However, Sim argued against introducing capital controls at present as it would negatively impact investor confidence and likely result in high costs. He explained that the Malaysian capital markets are much larger now compared to 1998 when capital controls were previously implemented.
Bank Negara Malaysia (BNM) will take measures to cushion the volatility of the exchange rate, according to Sim. This statement was made in response to a question posed by Wan Ahmad Fayhsal Wan Ahmad Kamal, who asked if the government planned to peg the ringgit to control its slide against the US dollar.
There have been ongoing debates regarding whether the ringgit should be pegged to control exchange rate volatility. As of 9.05 a.m. today, the ringgit had eased to 4.7675/7720 against the US dollar compared to Tuesday’s close of 4.7615/7655.
