KUALA LUMPUR: Malaysia will refrain from devaluing the Ringgit to boost economic growth, even if the global economy continues to show a downtrend, said Finance Minister Lim Guan Eng (pix).
Instead, he said, the value of the currency would be left to market forces. “We risk being labelled a manipulator if we do it,” he told the Dewan Rakyat yesterday.
He said such a step could also have a negative impact on the economy, including raising inflation. He pointed out that Malaysia had never devalued its currency.
“We are very concerned and careful not to deliberately devalue our currency and at the same time we will ensure the inflation rate does not spiral out of control. The situation here is under control.”
Lim was responding to a question from Datuk Seri Ronald Kiandee (PH-Beluran) if Malaysia would resort to currency devaluation as an economic strategy to beat the gloomy global economic outlook.
Unlike depreciation, which is the loss of value of a country’s currency in comparison with other reference currencies, a devaluation is the deliberate downward adjustment of the value of a country’s money.
Some governments resort to this approach to combat a trade imbalance, as devaluation reduces the cost of a country’s exports, making them more competitive in the global market.
On reports that Malaysia might be included in the US list of foreign currency manipulators, Lim clarified that the country would instead only be included in the US “watchlist”.
He explained Malaysia only “fulfilled” two of the three requirements that would categorise it as a manipulator, namely a trade surplus with the US of at least US$20 billion and a current-account surplus of a minimum of 2% of gross domestic product (GDP).
Malaysia did not meet the third criteria, which is persistent, one-sided intervention in the currency equivalent to 2% of the GDP in six months of a year, Lim added.
Asked if Malaysia was ready for the possibility of the US imposing restrictions and sanctions on Malaysia, considering similar action had been taken on Vietnam due to its strengthening economy, Lim reminded the US to stick to its own principle of multilateralism.
“It seems today the US does not follow its own rules and is doing things unilaterally. Malaysia is asking that it returns to its old ways, which is to uphold the system’s multilateralism in economy and business.
“This is to ensure there is no unwanted confrontation, should it impose any economic sanctions or tariffs. The US should discuss with the relevant governments instead.”
The Sun Daily
