Malaysia’s central bank is under pressure to steady the flagging national currency, the ringgit, which in recent days fell to new multi-decade lows against the US greenback and neighboring Singapore dollar.
Analysts say Bank Negara Malaysia (BNM) now faces a trade-off between raising rates and stifling an already sagging domestic economy or posing risks to financial stability by failing to act. Malaysia’s offshore borrowings, widely denominated in US dollars, amounted to 30 billion ringgit ($6.2 billion) as of August 2023.
Like other emerging market currencies, the ringgit has depreciated this year against a strong US dollar. But the extent of the slide – now the worst performer in Asia after the Japanese yen – has, according to BNM Governor Abdul Rasheed Abdul Ghaffour, belied Malaysia’s otherwise strong economic fundamentals and resilient banking sector.
“We are not in a crisis. It is different from what we experienced in the past,” Abdul Rasheed told reporters earlier this week, referring to the 1997-98 Asian financial crisis when the ringgit hit a benchmark low of 4.88 ringgit to the US dollar in March 1998.
The currency has in recent days tumbled to its lowest levels since, slipping to 4.79 to the US dollar on October 23 and hovering at 4.77 at the time of publication.
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Nile Bowie is a journalist and correspondent with the Asia Times covering current affairs in Singapore and Malaysia. He can be reached at nilebowie@gmail.com.
