KUALA LUMPUR – Assessment of the ringgit’s position and growth needs to be done holistically to determine the local currency’s actual performance, instead of merely measuring it against the United States currency, which is on the rise compared to most world currencies.
Deputy Finance Minister Datuk Mohd Shahar Abdullah said the ringgit had declined by 6.2% versus the US dollar since early 2022, which is in line with the performance of regional and developed countries’ currencies which depreciated between 2.8% and 16.4% as of July 22, 2022.
“The overall strengthening of the US dollar was driven by the aggressive rate hike in the US, the global risk-off sentiment following the conflict in Ukraine and modest growth expectations in China.
“As such, the government will continue to manage risks from domestic and external developments, and Bank Negara is also prepared to use its operational policy instruments to prevent significant fluctuations in the ringgit exchange rate,” he said during the question and answer session in the Dewan Rakyat today.
He said this in reply to a question by Tengku Zulpuri Raja Puji (Raub-DAP) who enquired about the effective measures taken to address the nation’s economic downturn, the sharp drop in the value of the ringgit and the significant increase in the cost of living.
Shahar said the position of the ringgit is very important to ensure that the country’s economic journey is at an optimal level, but it is unfair for it to be compared to the US dollar alone.
He noted that year-to-date, the ringgit had increased compared to several major currencies such as the Japanese yen (+12.2%), British pound (+6.0%), euro (+4.6%), the Philippines’ peso (+3.5%) and Thailand’s baht (+3.3%).
Additionally, Shahar said the country’s economic growth should also be evaluated through economic performance indicators, namely retail and wholesale trade, unemployment rate, industrial production, and national trade.
“In the second quarter of 2022, all four indicators showed good performance, therefore the overnight policy rate (OPR) was raised gradually, not suddenly like the US where it was raised by 150%.
“During the pandemic, we reduced the OPR by 125 basis points (bps), and to date, we have only gradually raised it by 50 bps because the OPR hike will also help the nation's economic growth,” he said.
He said this in reply to a supplementary question by Datuk Seri Shamsul Iskandar Md Akin (Hang Tuah Jaya-PH) who asked about the Finance Ministry’s strategies to ensure that the ringgit remains competitive. – Bernama, July 26, 2022
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