GEORGE TOWN – Putrajaya should not dismiss the ringgit’s decline in value as cyclical and should be tackling other fundamental issues, former finance minister Lim Guan Eng said.
The DAP politician said the government’s approach has caused a trust deficit among the people, who are also impacted by rising living costs brought on by the ringgit’s decline.
“The government needs to address inflation, high living costs and severe labour shortages, and the acute trust deficiency in ministerial competence.
“Unless these issues are addressed, the ringgit will continue to decline regardless of how proactive our monetary policy is,” Lim said in a statement.
He noted how the ringgit had dipped lower to RM4.48 to the US dollar and is expected to hit the psychological barrier of RM4.50 soon. The ringgit has also declined against both the Singapore dollar by 4.2% and the Indonesian rupiah by 3.1%, the Bagan MP added.
“As these are our major trading partners, clearly investors see Malaysia as performing worse not just one-to-one against the United States but also against our neighbours, such as Indonesia and Singapore.
“For the government to dismiss the decline in the value of our ringgit as cyclical due to rising interest rates in the United States, war in Ukraine or the Covid-19 lockdowns in China is like an ostrich in the sand choosing to cover up their inadequacies in good governance,” Lim said.
However, economic reports have indicated that the ringgit will correct itself in the second half of the year.
HSBC Global Research says the ringgit will see a modest correction in 2H2022 when sentiment surrounding China stabilises, but it acknowledged that the ringgit is likely to remain undervalued as global and national political uncertainties linger on.
Inflation and global supply chain disruptions remain troubled even after the economy reopened after Covid-19 lockdowns – compounded by the war in Ukraine and weather affecting crop harvests.
Globally, commodity prices have soared, as crude oil, metals, and even basic crops such as wheat are in short supply.
In an interview with Bernama, Bank Negara Governor Tan Sri Nor Shamsiah Mohd Yunus highlighted that 36% of Malaysian workers and 42% of labour income in Malaysia were part of export-oriented sectors.
A weaker ringgit is likely to make Malaysian exports more competitive, as it makes them relatively cheaper, she said.
Nor Shamsiah also said that Malaysia was “nowhere near that position” of having trouble paying its external debts. – The Vibes, August 20, 2022
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