SEVERAL initiatives have been explored to encourage a wider use of regional currencies to reduce reliance on the US dollar (de-dollarisation), says Prime Minister Datuk Seri Anwar Ibrahim.
Among them is the implementation of a local currency settlement framework, in which Malaysia currently has such an arrangement with Indonesia and Thailand.“Malaysia was also among the first countries to sign a currency arrangement agreement with the Bank of China in 2009.
“The agreement further facilitates the use of the renminbi and the ringgit for the purpose of trade payments and investments between China and Malaysia,” he said in a written reply to a question by Datuk Seri Dr Wee Ka Siong (BN-Ayer Hitam).
Dr Wee had asked what the latest stand was by the government on the use of the US dollar as an international trade currency and if there were alternatives to reduce reliance on the US dollar in global trade involving Malaysia.
Anwar, who is also Finance Minister, said this support mechanism was crucial to facilitate development and Malaysia’s market readiness to accept the use of various currencies.
“The government will ensure this mechanism is expanded and improved so that Malaysia will be prepared to accept the increased use of regional currencies for trade and investments,” he added.
On the use of the US dollar, Anwar said the use of other currencies aside from the US dollar was subject to demand in trade, adding that there were several explanations as to why it was used as a global trade and financing currency.
He said that most businesses prefer to use currencies that have a large and open financial market, as it would help ensure fast access to easy cash, especially during emergencies.
“To minimise risks, investors, banks and businesses prefer to use financial instruments in US denomination, which has the largest market for bonds and liquidity in the world,” he explained.
