Malaysia, which drew the ire of the International Monetary Fund with capital controls 17 years ago, has ruled out doing so again as its currency plunges.
Malaysia remains committed to market-friendly policies, Prime Minister Najib Razak said at a press conference Thursday, repeating four times that there would be no restrictions on capital flows or a fixed rate for the ringgit. Central bank Governor Zeti Akhtar Aziz also said there are no plans to move to a less flexible currency regime.
“The government remains steadfast in maintaining the integrity and openness of its markets, and will not impose capital controls, nor will it implement a peg for the ringgit,” Najib said.
While global investors are fleeing Malaysia’s currency, as political uncertainty clouds the outlook for an economy rocked by plunging oil prices and political scandal, Singaporeans are heading for its restaurants, big-box retailers and shopping centers.
The Singapore dollar closed at a record levels yesterday and it has climbed about 11% against the Malaysian currency this year. The weakening ringgit may help the country’s tourism sector at a time when other industries are hurting from an uneven global recovery that has curbed export demand and hurt commodity shipments.
While both the Singapore dollar and the ringgit have weakened against the greenback, Malaysia, as a net oil and gas exporter, and in the midst of the political uncertainty, has fared much worse. Against the U.S. dollar, the Malaysian currency has fallen about 15% this year, Asia’s worst performer. The FTSE Bursa Malaysia KLCI Index has lost 23% in U.S. dollar terms this year, the most among Asian benchmark gauges, while sovereign bond risks jumped to a four-year high.