OCT 7, when Budget 2023 will be tabled in Parliament, will be a consequential date.
The ringgit, and many other currencies in fact, have depreciated on the back of multiple interest rate increases by the US Federal Reserve and the growing uncertainties in the global economy.
We are in a precarious position as US interest rates have already increased to levels never seen since the global financial crisis of 2008. That’s almost 15 years ago. Domes-tically, our interest rates remain well below pre-pandemic levels. That’s done with good reason: Bank Negara has said it will take a “gradual and measured” approach, increasing interest rates gradually to ensure we can gradually adapt. However, this may have led to the sharp depreciation in our currency as investors seek to move their money to the United States because of the higher interest rates there.
The ringgit is at US$4.64 now, just barely 20 sen under the US$4.88 peak during the 1998 Asian financial crisis. A surefire way for the ringgit to reach that level next week is a reaction to Budget 2023 – it will be critical in determining the path of our economy and the ringgit. Its impact on our economy will reverberate through the years.
Case in point, the “mini budget” announced by Britain’s Chancellor Kwasi Kwarteng soon after new Prime Minister Liz Truss took over was vetoed by investors, collapsing the pound and risks throwing the country into a crisis.
The resemblance between the current state of our nation and Britain is uncanny. They’ve seen three different prime ministers in three years, and so have we. Public support for their ruling party is shaky at best, so is ours. Their budget folded to calls for populist measures – let’s hope ours won’t.
Let’s hope we do not repeat Britain’s mistake of writing “the shortest economic suicide note in history” as the London School of Economics’ blog puts it.
WONG TECK JIN