Bank Negara Malaysia (BNM) Governor Muhammad Ibrahim has asserted that the adjustment of the local currency should be viewed from a long-term perspective.
He said in the short term, the exchange rate movement could react to new headlines and market sentiments, instead of reflecting the underlying strength of the economy.
“What is important, therefore, is to ensure the availability of ample reserves, maintaining strong economic fundamentals and managing our exposure to external debt,” he said at the Malaysian Institute of Economic Research’s 30th anniversary dinner, here last night.
Muhammad said global concerns over monetary policy normalisation by the Federal Reserve continue to impact the ringgit.
He said the ringgit volatility’s since September 2014 has exceeded levels in previous episodes of sharp adjustment such as the European Sovereign Debt Crisis and Taper Tantrum.
“The weak ringgit was further amplified by the misperception about Malaysia’s reliance on commodities and our position as a net oil exporter,” he said.
Meanwhile, Muhammad said Malaysia needs to reawaken growth, reignite productivity and restore inclusiveness to secure continued and sustainable progress, as well as to navigate the current global landscape.
“Having a sub-par growth for nearly a decade now, policymakers need to relook at what we have learnt and rethink our approaches from fiscal to monetary policies and structural issues that need to be addressed, to enable us to remove any impediments to growth.
“We need to enact policy that enable the private sector revive their dynamism and explore new strategies to enable them to engage and uncover productive investment opportunities,” he said.
Muhammad said policymakers and the private sector should also need to automate and adopt technology to increase productivity and dispense the easy way out by depending on the low-cost labour model for competitiveness.
He said public and private sector leaders must help boost labour market participation across genders, creed and nationalities and cushion any negative social costs that may arise as a by-product of growth.