Ringgit May Strengthen To Near RM4 Against The US Dollar

Samuel Chua

14th October 2025 - 4 min read

The Ringgit may strengthen to just below RM4 against the US dollar within the next 12 months, supported by steady domestic demand and continued government fiscal discipline, said Finance Minister II Datuk Seri Amir Hamzah Azizan.

He said the stronger outlook reflects Malaysia’s solid economic fundamentals, despite external pressures such as US trade tariffs and global market volatility.

“The ringgit remains resilient because Malaysia’s fundamentals are still strong,” Amir said in an interview with Bloomberg Television’s Haslinda Amin. “Even if the US Federal Reserve slows the pace of rate cuts, the ringgit still has room to move ahead.”

Domestic Spending And Jobs Continue To Drive Growth

The ringgit has appreciated nearly 6% this year, making it the best-performing currency in Southeast Asia. Amir said policies such as civil service wage adjustments and support for small and medium enterprises (SMEs) have helped strengthen domestic spending and maintain economic momentum.

“The government is putting money in the hands of the people and small businesses,” said Amir, who previously led the Employees Provident Fund (EPF).

Malaysia’s economy is expected to expand between 4% and 4.5% in 2026, after growing between 4% and 4.8% in 2025, according to official projections. Economists anticipate that growth in the third quarter will ease slightly to 4.2%, from 4.4% in the previous quarter.

Budget 2026 Targets Balance Between Growth And Fiscal Reform

Prime Minister Datuk Seri Anwar Ibrahim tabled a RM470 billion federal spending plan for 2026, including allocations from government-linked companies. The budget aims to balance economic growth with fiscal reforms, targeting a deficit reduction to 3.5% of GDP by 2026, compared with 3.8% this year.

Malaysia’s reliance on oil-related revenue has declined significantly over the past decade, prompting the government to diversify income sources while managing spending carefully.

The 2026 budget does not include new broad-based taxes or subsidy cuts. Instead, it raises excise duties on cigarettes and alcohol starting November and confirms the introduction of a carbon tax next year, focusing initially on the iron, steel, and energy sectors.

Priority areas for growth include the semiconductor, renewable energy, and digital industries, which are expected to attract new investments and support long-term resilience.

Strengthening Revenue Through Compliance And Digitalisation

Amir said fiscal measures such as the expansion of the Sales and Service Tax (SST) and the rollout of digital e-invoicing will help improve compliance and boost government revenue.

“These steps will make Malaysia less dependent on oil and gas and strengthen our fiscal position,” he said.

He added that the government aims to pursue fiscal reform gradually, ensuring changes do not disrupt households or small businesses.

Think Tank Calls For Broader Tax And Spending Reforms

The Institute for Democracy and Economic Affairs (IDEAS) commended the government’s efforts to improve tax collection and reduce leakages but said more structural reforms are needed to broaden Malaysia’s tax base.

The think tank noted that Malaysia’s debt level remains high, with the federal government’s debt-to-GDP ratio at 64.7% as of end-June.

“Budget 2026 manages immediate pressures, but lasting progress depends on the government’s ability to turn fiscal restraint into reform,” IDEAS said. “Expanding the revenue base, improving spending efficiency, and strengthening institutions should remain key priorities.”

With Petronas’ proposed dividend of RM20 billion next year, half of what it was in 2023, Malaysia’s overall revenue growth is moderating in line with GDP.

Exploring New Sources Of Revenue From Rare Earths

The government is also exploring rare earth mining and processing as a potential new source of revenue. These minerals are vital for producing electronic devices, electric vehicles, and renewable energy technologies such as lithium batteries.

Anwar said Khazanah Nasional Bhd., Malaysia’s sovereign wealth fund, will collaborate with global partners to develop downstream processing capacity and strengthen Malaysia’s role in the supply chain.

Amir said detailed mapping is underway to identify Malaysia’s rare earth reserves and assess development opportunities. Some of these reserves are located in Terengganu, Kelantan, and Kedah, which are currently governed by the opposition.

“We are still in the early stages of understanding how to build this sector. Discussions are ongoing with several countries on potential partnerships,” he said.

Outlook: Steady Growth And Fiscal Caution

Malaysia’s economic outlook remains stable, supported by domestic spending, fiscal prudence, and gradual structural reforms.

Amir said the government’s priority is to maintain growth while managing fiscal risks responsibly. With continued discipline and reform, he believes the ringgit can continue its upward momentum toward RM4 per US dollar in the coming year.

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