Mahathir defends Malaysia's fixed exchange rate regime
Mahathir defends Malaysia's fixed exchange rate regime
LONDON (Reuters): Malaysian Prime Minister Mahathir Mohamad on Wednesday defended the country's fixed exchange rate regime and said there were no plans to alter the 3.8 to one rate at which it is pegged to the dollar.
"We have no plans to change it unless we become uncompetitive with our neighbors," Mahathir told Reuters after speaking at a Malaysian business conference in London.
Analysts and the International Monetary Fund have in the past criticized Malaysia's fixed exchange rate regime, set in September 1998, and some believe the rate is too low.
Central Bank Governor Zeti Akhtar Aziz told the conference that she believed the ringgit was fairly valued and was supported by "underlying fundamentals".
"Our exchange rate is only marginally undervalued and it is not misaligned," she told the business conference.
Mahathir also defended Malaysia's "unorthodox" economic measures, including controls on investments, which have been partly lifted, and the fixing of the exchange rate, saying that without these "much maligned" measures the Malaysian economy would not be growing so quickly.
"The economy is becoming significantly more resilient to external shocks," he told the conference.
Malaysia's Prime Minister also suggested that a single currency, along the lines of the euro, for the countries of the Association of Southeast Asian Nations (ASEAN) was not likely in the foreseeable future.
"I think it is a long way off," he told the conference.
ASEAN plus Japan, China and South Korea, agreed at the IMF meeting in Prague last month to seek a basic framework for a regional currency safety net at the group's heads-of-state meeting in late November.
This is viewed as laying the foundation for a permanent monetary institution in Asia.
But Mahathir said any Asian single currency would have to bear in mind the fate of the euro, which has tumbled against the dollar since its launch.
"I would like to see that currency does not get into the hands of speculators," Mahathir said.