‘Managed float system has helped strengthen ringgit’

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RISING IN VALUE: Since Malaysia reverted to the managed float system in July 2005, the value of the ringgit to the dollar as of yesterday, has risen 18.9 per cent. — Bloomberg photo

KUALA LUMPUR: Since Malaysia reverted to the managed float system in July 2005, the value of the ringgit to the dollar as of yesterday, has risen 18.9 per cent.

Deputy Finance Minister Datuk Ahmad Maslan said the rise reflects Malaysia’s improving economic fundamentals, although there were times when the ringgit declined, in reaction to market developments.

“For example, between May 22 to Oct 11 this year, the ringgit slid 5.3 per cent against the dollar in line with regional trends, and following an announcement on the US Federal Reserve possibly winding down its asset purchasing or quantitative easing programme,” he added.

He said this in reply to a question from Datuk Seri Abdul Ghapur Salleh (BN-Kalabakan) in the Dewan Rakyat here yesterday.

Abdul Ghapur had asked what measures were being taken by the government to arrest the decline in the value of the ringgit in contrast to most other currencies.

Ahmad Maslan said the overall impact of a weak ringgit on inflation was under control as imported goods comprised just 16 per cent of the consumer price index.

He said from July-August this year when the ringgit was weak, the value of the country’s exports was back at an improved 8.4 per cent.

This is compared to the minus 3.8 per cent in the first half of 2013, while exports rose 9.9 per cent in the same period.

He said the government had taken five steps to strengthen the ringgit, namely, enhancing domestic demand since 2000 which was a catalyst for economic growth, including through government and private sector investment.

“The government also strengthened the financial system through resilient banking as well as diversifying and expanding the domestic bond market.”

The third step he highlighted had to do with the strengthening of the international reserves.

“For example, as of Oct 31, 2013 it stood at US$137.1 billion (RM446.2 billion).The reserves position was sufficient to finance 9.7 months of retained imports.

“The fourth move was to strengthen exports by building the products of small medium enterprises through diversification and quality, as well as searching out new markets,” he said.

Ahmad Maslan added that the final step was to maintain the rate of the managed float and not utilising the fixed exchange rate or free float. — Bernama