KUALA LUMPUR – The ringgit has yet to reach its fair value despite its recent rise against the US dollar and its emergence as Southeast Asia’s best-performing currency, said Prime Minister Datuk Seri Anwar Ibrahim.
“It is still undervalued (even) at RM4.10 per US dollar. People know it used to be RM3.80, but it is wise for it to strengthen gradually without intervention.
“Let the market forces play. This would reflect confidence in government policies and how we implement reforms,” he told CNBC in an interview.
On a Friday-to-Friday basis, the ringgit fell to 4.2155/2240 against the US dollar, down from 4.1230/1280 the previous week.
BMI Country Risk & Industry Research (BMI), a unit of Fitch Solutions, revised its end-2024 forecast for the ringgit to RM4.00 per US dollar, from RM4.55 previously, reflecting the currency’s robust performance in the third quarter of 2024.
Some analysts are more optimistic, predicting the ringgit could reach RM3.55 against the greenback.
While acknowledging that a stronger ringgit might raise concerns among exporters, given Malaysia’s role as an export-driven economy, Anwar, who is also Finance Minister, said the issue is not significant as the currency remains undervalued.
“Yes, it will cause some concerns among exporters, but not too many and not too serious, as the ringgit is still undervalued. However, it has benefited immensely because we are a trading nation and import a lot from overseas,” he said when asked whether a stronger or weaker ringgit would be more favourable for Malaysia.
Anwar also told CNBC that Putrajaya is steadfast in achieving its gradual fiscal consolidation target by reducing national debt, while continuing to invest in improving the quality of life for all Malaysians.
He reiterated that his administration had inherited a debt of RM1.5 trillion, and had reduced the annual fiscal deficit to 5% of Gross Domestic Product (GDP) in 2023, down from 5.6% in 2022.
“The annual fiscal deficit is gradually declining, (along with) borrowings, which have gone to RM93 billion in 2023, and (targeted) RM86 billion this year. While this is quite substantial, it is not enough.”
Anwar has previously said the government projects a further reduction of the fiscal deficit to 4.3% this year.
He also told CNCB that while the government has set targets for reducing the fiscal deficit and national debt, it will continue to invest in areas such as education, public health, and infrastructure to enhance the quality of life for Malaysians.
National debt currently stands at 64% of GDP, with the government aiming to reduce this figure to at least 60% in stages. – October 5, 2024