KL will change ringgit peg only if better option found

KL will change ringgit peg only if better option found

Malaysia is not averse to changing its seven-year-old currency peg but it will only do so if it can find a better alternative to promote trade, investment and economic growth, a senior central bank official said on Tuesday.

Bank Negara Malaysia deputy governor Ooi Sang Kuang said any changes to the peg of 3.80 to the dollar, fixed since September 1998, must be weighed carefully given the possible impact on the whole economy.

"The issue here is, if we need to change the peg, we will change it; and if we change it, we will do so if there is a better, alternative regime that will promote trade and investment and growth in the economy," he was quoted as saying by Bernama news agency.

As an open economy, Ooi said Malaysia has to shield itself from high volatility in the exchange rate market.

At the moment, he said manufacturers strongly supported the peg because it had enabled them to remain competitive and profitable.

Some economists have predicted that Malaysia might move to a managed float system by June next year but Bank Negara governor Zeti Akhtar Aziz last week said the peg remained sustainable despite the dollar's weakness and stressed that any change would be based on "long-term structural considerations."

The International Monetary Fund (IMF) earlier this month urged Malaysia to scrap the peg to manage risks associated with increasing capital flows.

Former premier Mahathir Mohamad, who imposed the peg as part of capital controls to shield the economy from the 1997-98 regional financial crisis, has since joined others in calling for a review of the system as a sharp decline in the dollar's value has made Malaysian imports costlier.-- AFP