BOMBSHELL - 'ENDANGERED SPECIE' RINGGIT TO FACE NEW MASSIVE ATTACKS? - BANK NEGARA MAY NOT HAVE ENOUGH MONEY TO DEFEND THE RINGGIT - AND PREDATORY INVESTORS ALREADY SMELL BLOOD - EVEN AS DEJA-VU ANWAR ACCUSED OF TELLING WHITE LIES IN 2024, THE SAME AS IN 1997 - UNEMPLOYMENT THE LOWEST & GDP GROWTH THE HIGHEST BEFORE ANWAR'S ASIAN CRISIS FIASCO, THE OPPOSITE TO WHAT HE NOW CLAIMS - YET DAP, NO LONGER TRANSPARENT, ECHOES HIM INSTEAD OF DOING ITS OWN RESEARCH!
Anwar Ibrahim says Ringgit collapsed in 97-98 due to a rise in unemployment but official Malaysian Govt figures show that unemployment was at or near RECORD LOWS in '97-'98, - Anwar's claims add to evidence that Bank Negara's reserves are insufficient to defend the Ringgit
NUR LAYALI MOHD ALI KHAN, Principal Assistant Director, MBLS
Free Malaysia Today has reported:
The current decline in the value of the ringgit cannot be likened to its fall during the Asian Financial Crisis in 1998 as the country has a more stable economic foundation now, says Prime Minister Anwar Ibrahim.
The ringgit has slid by over 4% so far in 2024, adding to losses from the previous three years. It opened at 4.7745/4.7800 to the US dollar today, compared with yesterday’s close of 4.7710/4.7800.
Speaking to reporters after officiating the opening of the Tun Razak Exchange Financial Hub at the Exchange 106 Tower here today, Anwar, who is also the finance minister, said the ringgit’s drop in 1998 came amid increases in the inflation and unemployment rate.
The graph above , displaying statistics from Malaysia's Department Of Statistics, says otherwise. Unemployment was at its lowest,and GDP growth at its highest before the Asian Crisis of 97-98.
Anwar's claims add to evidence presented below that Bank Negara's reserves are insufficient to defend the Ringgit
Tuesday, February 20, 2024
Does Malaysia's Bank Negara have sufficient USD to defend the Ringgit- Reserves financed by bank desposits ,actual reserves only USD 39 Billion, not USD 113.5 BillionUSD
The Ringgit's new low of RM 4.80 to the USD , readers may want to take a closer look at Bank Negara's Balance latest balance sheet.
BNM STATEMENT OF ASSETS & LIABILITIES
As at close of business on Friday, 29 December 2023
As disclosed in Bank Negara's own balance sheet, actual reserves are only RM 186,743,923,867 or in current USD terms, only USD 39 Billion, not USD 113.5 Billion as reported. That larger figure is financed out of statutory deposits , placed at no interest by financial institutions at Bank Negara, and as was the case in 1997, cannot be relied on in to defend the Ringgit times of crisis, when USD and other foreign currency deposit holders are likely to want to take their cash home.
TO BE READ WITH
Anwar's calculated dismissal
- The Free Library. 1998 First Charlton Communications Pty Ltd https://www.thefreelibrary.com/Anwar%27s+calculated+dismissal.-a055143627
Western critics have roundly condemned Malaysian Prime Minister Mahathir Mohamed's decision to oust his deputy Anwar Ibrahim and impose capital controls. Writer GANESH SAHATHEVAN begs to differ
The recent dismissal of Malaysia's Anwar Ibrahim from his post as Finance Minister and Deputy Prime Minister is seen by many international commentators as detrimental to Malaysia's economic fortunes.
And capital controls introduced by Prime Minister Mahathir Mohamed, who assumed Anwar's duties after ordering his dismissal on grounds of sexual misconduct and corruption, are thought by many commentators to be regressive and likely to impede Malaysia's recovery.
Mahathir, however, had no choice but to introduce capital controls.
Anwar's policies were bleeding dry the country's cash reserves and meant the imposition of capital controls was necessary to avert bankruptcy.
As finance minister, Anwar was responsible for financing Malaysia's foreign reserves almost entirely out of statutory deposits -- placed at no interest by financial institutions -- at the Central Bank.
Anwar was also responsible for Malaysia's dependence on short-term foreign investment to finance the country's perennial current account deficit. This was a policy particularly evident in 1996 when, in order to shore up the country's reserves, interest rates were raised to attract funds into the country.
Simultaneously, the statutory reserve deposit ratio was raised from 10 per cent to 13 per cent within a period of six months to ensure that the Central Bank took control of the funds drawn into the country.
The need for additional foreign reserves may have also been necessary as a result of two significant losses of foreign reserves by the Central Bank in October 1995 and February 1996. On both occasions the Central Bank reported a loss of 3 billion ringgit, or about 3 per cent of its total reserves over a period of a fortnight.
The magnitude of these falls over such a short time suggests that the Central Bank suffered foreign exchange trading losses. Adding to the need for foreign funds was the public sector budget deficits that Anwar ran for most of the early '90s. This, too, was an issue that was never discussed publicly because the deficits were hidden in the detail of the national accounts.
When delivering his yearly budget speech, Anwar always declared a balanced budget.
The increase in interest rates and statutory deposit ratio saw Malaysia's reserves rise from just below 60 billion to 70 billion ringgit within a period of 10 months in 1996.
This won Anwar praise from Michel Camdessus, managing director of the International Monetary Fund, despite the methods employed.
The flight of foreign capital from Malaysia and the attack on the ringgit by hedge funds in 1997 proved how illusory Malaysia's reserves were.
The Central Bank, unable to cope with having to finance the sudden withdrawal of foreign funds, was left with no choice -- despite the seemingly large pool of reserves -- but to print money in order to avoid a liquidity crunch.
This, in turn, had the effect of exacerbating the fall in the value of the Malaysian ringgit, which made it impossible to defend the ringgit against speculative attacks.
Thus, capital controls became necessary in order to conserve whatever foreign currency the country had left, and rectify the structural weaknesses in the management of the country's reserves.
Anwar now faces criminal charges for sexual misconduct and corruption.
Should he prove himself innocent, he might make a comeback in the Opposition. He could offer himself to the Malay community as an alternative to the ruling UMNO, in which he was deputy president to Mahathir prior to his dismissal.
Re-entering UMNO would be difficult given the opposition he would face from other UMNO leaders, who have long seen him as an obstacle to their own designs on the party's presidency.
However, in Opposition he would not be able to exercise the level of patronage he did as finance minister and deputy leader of UMNO -- and this might diminish his appeal.
Anwar is unlikely to win the support of the ethnic Indian and Chinese voters, who make up 40 per cent of the population, because they fear the right-wing Muslim views he expounds.
His use of the Muslim Youth Movement to incite demonstrations and riots against Mahathir only served to reinforce these fears.
Writer - (*) Ganesh Sahathevan is a Malaysian journalist currently based in Sydney.
Seven suggestions to arrest ringgit slide
By Howard Lee Chuan How, DAP MP for Ipoh Timor
Published: Feb 25, 2024 12:32 PM
Against the backdrop of a global financial upheaval and conflicts, the ringgit has plummeted to new lows against the Singapore and the US dollars.
The widespread concerns over the nation's economic resilience and strategic response are escalating. Some are even drawing parallels with the Asian financial crisis.
Granted. The ringgit slide is no small matter. The impact is felt through the cost of goods and materials by Malaysians across the board.
Despite that, we have seen unprecedented and extraordinary levels of foreign direct investment (FDI) unlike during the Asian financial crisis, when the opposite was prevalent.
The Malaysian economy in 2024 shows signs of resilience and growth, with moderate inflation, a stable unemployment rate, and expectations of further foreign and domestic investments.
This contrasts dramatically with the period of the Asian financial crisis, which was marked by economic contraction, higher unemployment, reduced investments and even divestments, as well as deflationary pressures.
The facts show that Malaysia today holds strong economic fundamentals and resilient financial structures, therefore the current challenges require a more nuanced understanding. It is a far cry from the crisis we saw in the late 90s.
Nonetheless, the currency challenge is still something we must address head-on. The strategic imperative here is to strengthen demand for the ringgit to bolster its value.
To do so, Malaysia must consider adopting a series of tactical policies aimed at achieving that:
Fiscal policy
Implementing fiscal policies that stimulate economic growth can enhance the currency's value.
This includes reducing government debt, increasing infrastructure spending, and creating a favourable business environment to attract foreign investments.
Boosting public confidence
The value of a currency is significantly influenced by public perception. Thus, fostering political stability, transparent and consistent government policies, and effective communication can enhance confidence in the ringgit.
All malignant speculations and attempts of extra-parliamentary change of government by irresponsible quarters must be stamped out as a bare minimum.
Stronger investments are urgently needed, into communication and amplification of government policies to instil the confidence, consistency and clarity that is currently lacklustre.
Expats pay into Malaysian accounts
Remunerating expatriates in their home currency is prevalent (27 percent of expatriates in Malaysia are paid on a part home part host split of varying percentages, and 31 percent of all expatriates with 51 percent from the US being fully home currency remunerated according to Mercer).
Transitioning towards mandating expatriates’ remuneration to be deposited into Malaysian accounts but allowed to be denominated in their home currencies needs to be considered. Especially during this period of significant FDI and technological transfer by expert expatriates, such unpopular yet necessary intervention aligns with broader economic goals.
This includes enhancing local economic activity, stabilising the ringgit, and bolstering the nation's financial health. However, this policy shift requires meticulous planning and execution to avoid it becoming a push factor for investment realisation.
E-payment platforms for incoming tourists
Promoting or mandating the use of local e-payment platforms by foreign tourists can directly boost demand for ringgit, reduce transaction costs, and improve data collection, despite potential adoption and compatibility challenges.
Security concerns will always be in the background, however, if done well, can be a significant weapon to have in the arsenal against the current attack on our ringgit.
Promoting foreign education
Making Malaysia a more appealing destination for foreign students can increase the demand for domestic currency, particularly given the high demand for Malaysian postgraduate programs among foreign students, especially from China and the Middle East.
Of course, this must also be in tandem with reforming the higher education architecture to retain the best of our local talents and prevent them from being appropriated by foreign elite universities due to them being denied the best local universities for various reasons.
Sideways foreign exchange intervention
Cognisant of the strong economic fundamentals that our economy sits on, as a monetary last resort, strategic interventions in foreign exchange markets can elevate its value. Bank Negara, however, must first establish a “red line” only known to the institution itself.
Although this short-term strategy can mitigate rapid devaluation and combat volatility and imported inflation, its sustainability is questionable due to limited reserves.
Nonetheless, it is an intervention that must not be discounted during these testing times, and also to ensure the exchange rate of ringgit is reflective of Malaysia's strong economic fundamentals.
Currency stabilisation funds leveraging MM2H deposits
The revamped Malaysia My Second Home (MM2H) programme, which requires cash deposits in exchange for medium to long-term residential visas, could serve as a currency stabilisation fund, providing additional support to the ringgit.
Raising interest rates by Bank Negara could be a remedy and is probably the easiest to kick into action.
However, the side effects of this economic prescription - such as higher borrowing costs for businesses and individuals, a potential slowdown in economic growth, and a dampened property market - cast a long shadow.
The broader impact on the rakyat who borrows and the economy suggests that this financial manoeuvre is a bitter pill that should stay in its box.
The delicate balance between stabilizing the currency and maintaining economic vitality decides to hike interest rates a contentious strategy, one that might be better left on the shelf for now.
While the ringgit's depreciation against major currencies is alarming, it does not parallel the Asian financial crisis, thanks to today's different and much stronger economic fundamentals.
This situation calls for the government and Bank Negara to collaborate closely with MPs, uniting efforts and strategies to address this crisis effectively.
The coming parliamentary session commences tomorrow, I'm sure it will be a lively forum for this hot-button issue.
The concerns and suggestions of my constituents in Ipoh Timor I put forth herein, will be what I intend to vocalise in the august house, and to Bank Negara when I meet them on the third day of this parliamentary session. - Writer HOWARD LEE is Ipoh Timor MP
-https://realpolitikasia.blogspot.com/ / DAP press statement
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