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 Finance Minister II Datuk Seri Amir Hamzah Azizan.
He said while Malaysia’s OPR remains at 3% after it was increased by 125 basis points, the four other countries hiked their key policy rates by 200 to 450 basis points – much higher than Malaysia’s.
“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 Bank Negara’s monetary policy committee in determining the OPR is to stabilise prices and ensure sustainable economic growth and not to control the ringgit exchange rate,” Amir Hamzah said when winding up the debate on the motion of thanks on the royal address in the Dewan Rakyat yesterday.
He added that 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.
In a supplementary question, Datuk Seri Dr Wee Ka Siong (BN-Ayer Hitam) asked Amir Hamzah to explain the government’s plan in managing the national debt settlement and steps it will take to cover the increase in costs.
According to the MCA president, the current debt servicing costs have risen dramatically.
“The debt service cost payment for Q4 of 2020 was RM8.4bil and increased to RM10.2bil in Q4 2021. It then jumped to RM12.1bil in Q4 2022 and for Q4 2023, it skyrocketed to RM16.5bil.
“How will the government cover the increase considering that the bond issue interest has increased from 2.5% in 2017 to almost 4% currently?” Dr Wee asked. To this, Amir Hamzah asked for the government to be given the space to continue its efforts in ensuring economic growth and strengthening the ringgit.
He said the government is taking measures to protect its fiscal policy where among others, the country’s fiscal deficit to gross domestic product ratio has been lowered to 5% from 5.6% in 2022.
“This year, we project that it will go down further to 4.3%. Other than that, the government is also collaborating with government-linked companies and government-linked investment companies, 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 returns back (to the country). 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,” said Amir Hamzah.
