Lower OPR hike caused ringgit's decline, Amir Hamzah tells Parliament

KUALA LUMPUR: The lower Overnight Policy Rate (OPR) increase by Malaysia as compared to the Philippines, Indonesia, Korea and India is one of the main reasons for the ringgit's decline, says Datuk Seri Amir Hamzah Azizan.

The Second Finance Minister said while Malaysia’s OPR remained at 3% after it was increased by 125 basis points, the Philippines, Indonesia, Korea and India increased their key policy rates by 200 to 450 basis points, much higher than Malaysia.

"The lower OPR increase compared to those countries is one of the main reasons for the ringgit's decline.

"The significant difference in interest rates with the United States which is as much as 250 basis points prompts foreign investors to shift their capital out of the domestic market to markets that provide higher returns.

"The main goal of the Bank Negara Malaysia’s Monetary Policy Committee in determining the OPR rate is to stabilise prices and ensure sustainable economic growth, and not to control the ringgit exchange rate.

"If the OPR is increased to strengthen the ringgit, the national economy will be affected and various parties, especially borrowers, will have to pay higher interest," he said when winding up the debate on the motion of thanks on the Royal Address in the Dewan Rakyat on Monday (March 11).

Amir Hamzah said the government was taking necessary measures to protect its fiscal policy where among others, the country’s gross domestic product’s (GDP) debt which stood at 5.6% in 2022 has been lowered to 5% last year.

"This year, we project that it will go down further to 4.3%. Other than that, the government is also collaborating with GLCs and GLICs where we provide opportunities for them to gain more profits through their investments abroad.

"When they (businesses) invest abroad, they will gain much more profits and they will bring the return back (to the country) and in the last one and a half weeks, we could see the ringgit value strengthening.

"Now, the confidence in foreign investors who are investing in Malaysia is also encouraging. So, let the government continue with its methods," he added.

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