Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz has reiterated that the government continues to remain proactive in ensuring the stability of the ringgit and Malaysia’s financial market. 

According to Tengku Zafrul, the country’s financial stability is maintained primarily through the implementation of prudent monetary policies by Bank Negara Malaysia (BNM). These include setting foreign loan limits to minimise the exposure of the government’s debt to the risk of currency fluctuations.

“We also ensure that the flexible exchange policy remains Malaysia’s first line of defence to absorb external shocks, while at the same time, ensuring that domestic lending activities continue to be supported,” the minister further said, adding that the resilience of Malaysia’s banking institutions against domestic and external risks is also amplified through robust risk management practices. 

Additionally, Tengku Zafrul highlighted BNM’s international reserves – which stood at USD109.2 billion as at 29 July 2022 – as a liquidity buffer during periods of large and uncertain capital flows. Under such circumstances, the reserves will enable an orderly adjustment of the ringgit’s exchange rate.

On the value of the ringgit against the US dollar, Tengku Zafrul acknowledged that the national currency had depreciated against the greenback by 6.5% between January to 9 August 2022. However, he commented that various other currencies had also depreciated against the US dollar during the period. These include the South Korean won, which fell by 9% against the US dollar, the UK pound sterling, the Japanese yen, and the Philippine peso. 

Additionally, the finance minister emphasised that the value of the ringgit needs to be measured holistically, and should not be viewed solely against the US dollar. He highlighted that on average, the ringgit’s exchange rate is not as affected as the currencies of Malaysia’s other trading partners.

Furthermore, Tengku Zafrul noted that various external factors had contributed to the depreciation of the ringgit as well as most major and regional currencies. Citing the spike in inflationary pressures around the world as one of the factors, he explained that the situation had forced the US Federal Reserve and several other central banks to hike their interest rates faster in a bid to ease the rising inflation. 

“The second factor is the geo-political situation in Russia and Ukraine, and the third factor is the economic slowdown in China, because China is Malaysia’s main trading partner and its conservative Covid-19 policy has caused the supply chain to be somewhat disrupted,” Tengku Zafrul further stated.

(Source: The Edge Markets) 

• TAGS:
• Bank Negara Malaysia
• BNM
• Currency Depreciation
• Ringgit Currency
• Ringgit Depreciation
• Tengku Datuk Seri Zafrul Abdul Aziz
• US Dollar
• US Federal Reserve