Mahathir pushes for pegging ringgit to US dollar as Malaysian currency keeps sinking
- Former prime minister said bringing back the policy he implemented during the Asian financial crisis could help reduce cost of living
- The ringgit is the worst performer in emerging Asia this year, sliding almost 8 per cent against the US dollar
“It’s something to be considered,” Mahathir said in an interview on Wednesday in his office in the administrative capital of Putrajaya.
The currency may slide a further 5 per cent to a record-low 5 per dollar, Mahathir, now 98, said in the interview. “Just imagine what that would mean to your cost of living,” he said, adding that pegging the currency would help to alleviate price pressures.
Malaysian assets have suffered this year as surging US interest rates have siphoned funds back to the world’s biggest economy.
Bank Negara Malaysia has held its key rate at 3 per cent since July, putting the gauge at a record discount to the upper bound of the Federal Reserve’s benchmark. At the same time, sputtering growth in China, Malaysia’s biggest trading partner, has weighed on its exports.
Malaysians to pay more for staples as weak ringgit enters ‘uncharted territory’
Malaysian policymakers remain committed to ensure the ringgit adjusts in an orderly manner, Bank Negara Malaysia Governor Abdul Rasheed Ghaffour said last week. “We have been in the markets, and we will, when needed, continue to be in the market,” he said.
The central bank did not respond to a request for comment about a potential ringgit peg on Wednesday.
Malaysia’s currency tumbled during the Asian crisis, piling pressure on the country’s foreign-exchange reserves.
Mahathir, who first became prime minister in 1981, rejected a bailout by the International Monetary Fund. He instead introduced capital controls in September 1998 and then pegged the ringgit at 3.8 per dollar, a policy that stayed in place until 2005.
The IMF, which at the time called the ringgit peg a “retrograde step,” later acknowledged it was a “stability anchor” that helped the economy recover.
“Foreign investors were very happy,” Mahathir said in the interview.
‘Demand is high’: Singaporeans eye cheaper trips to Malaysia as ringgit plunges
Mahathir said he had floated the idea of re-pegging the ringgit to the central bank when he returned as premier.
“They said: ‘No, it cannot be done because it is wrong internationally, fixing the exchange rate is wrong,’” Mahathir said.
The elder statesman has a long history of disdain for currency traders and once called billionaire investor George Soros a “moron” for his bold bets against the ringgit in the run-up to the Asian crisis.
“We should outlaw currency trading,” he said in the interview. “You are making profit out of creating poverty for people.”
