ENHANCING ECONOMIC FUNDAMENTALS CRUCIAL TO SAFEGUARD RINGGIT'S VALUE -- EXPERT

Enhancing economic fundamentals by implementing policies aimed at strengthening the economy, such as improving productivity, decreasing reliance on imports, and fostering sustainable growth, is crucial to safeguard the ringgit's value. 

Putra Business School, Master of Business Administration programme director associate professor Ahmed Razman Abdul Latiff said that to mitigate the impact of currency fluctuations, the government can diversify exports by expanding export markets and product offerings, thus reducing reliance on a few key sectors or markets. 

He said foreign exchange reserves management must be strengthened to ensure adequate foreign exchange reserves to support the currency and manage volatility.

“Ultimately, a combination of these actions, along with a stable macroeconomic environment and prudent financial management, can help support the ringgit moving forward,” he told Bernama.

According to Bank Negara Malaysia (BNM) governor Datuk Abdul Rasheed Ghaffour, the central bank is committed to playing its part to preserve confidence in the ringgit with collective actions needed to safeguard the value of local currency.

In his foreword in the Economic and Monetary Review 2023 report released, he said the central bank has collaborated with the government to increase inflows that would allow the ringgit to appropriately reflect the fundamentals and prospects of the Malaysian economy.

Moreover, government-linked companies (GLCs) and government-linked investment companies (GLICs) have been encouraged to consistently repatriate foreign investment income and convert it to ringgit, he said.

In a media briefing in conjunction with the release of BNM's flagship publications -- Annual Report 2023, Economic and Monetary Review 2023, and Financial Stability Review for the Second Half of 2023, the governor said the decline in the value of the ringgit is temporary and due to external factors.

Since the beginning of 2024, he said the ringgit has depreciated from RM4.60 per US dollar to RM4.79 per US dollar on February 20. However, the local note has recovered to RM4.70 per US dollar as of 15th March. 

Ahmed Razman said the actions outlined by BNM, such as engaging with large investors and corporates and encouraging GLCs and GLICs to convert foreign investment income into ringgit, could certainly help support the local note. 

However, he opined that their effectiveness in stabilising the currency would depend on several factors, including market conditions, economic policies, and global trends. 

Furthermore, he said BNM certainly has the financial capacity to intervene in the foreign exchange market to support the ringgit if necessary, considering its total assets position, which has increased by 1.97% to RM631.26 billion as at 31st December, 2023, compared with RM619.04 billion in 2022.

“However, the effectiveness of intervention depends on various factors such as market conditions, the level of reserves, and the impact on other policy objectives,” he said.

Ahmed Razman remarked that while BNM has the capacity to intervene, exchange rate management is just one aspect of its overall mandate.

“The central bank also focuses on maintaining price stability, promoting financial stability, and supporting sustainable economic growth.

“Any intervention in the foreign exchange market would need to be carefully balanced with these objectives,” he added.