Aku nak kongsi sikit informasi pasal tambatan ringgit. Untuk cambahan ilmu sama sama. Ditulis oleh Lim Sian See
Capital Controls and Pegging our Ringgit.
In 1998 when we pegged the currency at RM3.80, we also instituted currency controls which made it difficult for foreign capital to enter and exit Malaysia.
Essentially, we did not allow capital already in the country to leave Malaysia easily – trapping funds held by foreigners and Malaysians within our system and preventing them to go overseas.
Other countries who pegged their currencies such as Hong Kong or Brunei (which pegs it against the Singapore dollar), do not have such capital countries and defends their peg using their FOREX reserves.
At that time in 1998, Malaysia did not have strong FOREX reserves hence the traditional peg would not have worked as we would have gone bankrupt from defending that peg. Therefore, on top of the peg, Malaysia had to implement very strict capital controls too.
Back to present day, the Ringgit closed at RM4.17 to the USD yesterday – down from the low of RM4.28 reached on Wednesday.
If you look at the graph, you can see that from January to July 2015 our ringgit fell 30sen from RM3.50 to RM3.80. But in less than a month from Aug 1, we dropped 48 sen from RM3.80 to RM4.28
Of course other factors such as the China devaluation which also caused oil and commodity prices to fall further was also a factor but our currency depreciation velocity past RM3.80 was very much sharper from other countries’ graph during the same period.
This led me to believe that one of the reason for this much sharper weakening was the RM3.80 peg of the past. In fact one economist said in 1998 that Malaysia will pay the price of capital controls and betraying investors confidence not during the 1998 period but the next time our currency is under great pressure. That time appears to be now.
I have read reports that many people – residents and non-residents – were afraid that after passing the previous peg level of RM3.80, Malaysia would implement the peg and capital controls again.
This fear may be the reason why the depreciation started to accelerate much more than other countries during the same period once we went past RM3.80.
This is also why PM Najib had publicly announced very firmly last week that Malaysia will not peg the currency and implement capital capitals again.
However, the market will probably not immediately believe this commitment as Malaysia has had a track-record of suddenly pegging the ringgit and implementing capital controls which trapped a lot of investors.
Pegging and capital countries are not necessarily good as it pisses off foreign investors. In fact, the next few years following 1998 saw a big drop in foreign investment and stunted our growth compared to the other countries affected by the Asian financial crisis in 1998.
|Malaysia pegged our currency and imposed capital controls in 1998|
|South Korea and Thailand did not but their currencies recovered equally quickly too|
- A currency peg will not stop a depreciating currency, at least not for very long
- A currency depreciation will not cause the economy to tank; that is something that should be attributed to the interest rate defence
The State of the Nation: Has Malaysia escaped the middle-income trap? Read here.