No drastic changes to ringgit's value, says Finance Minister

KUALA LUMPUR: Bank Negara will not make any drastic or extreme changes to the value of the ringgit, says Tengku Datuk Seri Zafrul Abdul Aziz.

"This action will assist businesses to plan while allowing for better implementation of business decisions and investments," the Finance Minister said when replying to a question raised by Wong Hon Wai (PH-Bukit Bendera) in Dewan Rakyat on Tuesday (Oct 4).

He wanted to know the measures to be taken by the government through Bank Negara to overcome the risks involving foreign currency exchanges.

Wong said that the exchange rate was US$1 to RM2.122 during the Asian Financial Crisis in 1998 and has slipped to US$1 to RM4.651 currently.

Tengku Zafrul said that the nation's economic fundamentals remained positive despite facing the challenges to the global economy brought about by the Covid-19 pandemic.

He cited the introduction of dynamic hedging as an example of reducing risks for those in the currency market and businesses.

Tengku Zafrul then said that this included attracting investors to the local bond market while improving the foreign currency exchange.

"The daily foreign exchange transactions continued to increase to an average of US$13.3bil to date compared with US$11.3bil in 2021 based on two-way transactions," he added.

Tengku Zafrul also said that the nation's economy was not headed for a crisis because the situation during the Asian Financial Crisis in 1997/98 was different.

He also told the House that several other nations were also facing economic challenges due to current global events.

"Our currency dropped almost 54% in 1997 with the lowest exchange rate hitting RM4.88 for US$1.

"The nation's share market was also badly affected where the then-Kuala Lumpur Stock Exchange (KLSE) fell by some 800 points in just two months from 1,077 points in June 1997 to 262.7 points in September," he said.

Tengku Zafrul described that as the worst economic crisis ever faced by the nation resulting in 102,000 Malaysians losing their jobs.

He then said that Bank Negara had also raised the interest rate to 11% to overcome the ringgit's devaluation and control inflation.

Tengku Zafrul then said that the situation was different now as the nation's economy was more diversified and resilient.

"To date, our permanent account remains positive with a total of RM3bil in the first quarter and RM4.4bil for the second quarter," he added.

"As such, although we are facing some challenges due to external factors beyond the control of the government, I wish to stress that our nation is not facing or headed towards an economic or currency crisis," he said.