CAPITAL FLIGHT WILL WORSEN IF NAJIB DOESN'T COME CLEAN ON RINGGIT PEG - GUAN ENG

GEORGE TOWN - DAP secretary-general Lim Guan Eng today urged Putrajaya to take a clear position as to whether it will impose capital control mechanisms to deal with the continued slide in the value of the ringgit.

Lim said there are rising concerns that the Malaysian stock market will suffer adversely if regulators don’t deal with persistent rumours that the federal government will step in to stop the currency from devaluing further.

“The finance ministry must state clearly their position on whether they will impose capital control otherwise the stock market will continue to drop,” the Penang Chief Minister said at a news conference.

Capital control is a measure that a government can take to control outflows from the capital markets, which could include exchange controls to prevent or limit the buying and selling of a national currency at the market rate.

The last time capital control was imposed in Malaysia was by then Prime Minister Tun Dr Mahathir Mohamad in September 1998 with exchange controls and limits on outflows from portfolio investments.

Lim today blamed the ruling Barisan Nasional for pushing what he described as failed financial policies such as the recent Goods and Services Tax (GST) and the ongoing 1Malaysia Development Berhad (1MDB) financial scandal, which he claimed dragged the ringgit to its lowest value in over 17 years.

DAP’s Lim Guan Eng

“The drop in the ringgit is worrying because it has now dropped to RM3.90 against the US dollar and international fund managers even predicted that it could drop to RM4.10,” he said.

Citing findings by economist Prof Zakariah Abdul Rashid, Lim said it was worrying to see Malaysia’s foreign reserves drop from US$140 billion (RM541.24 billion) in the first quarter of 2013 to US$100.5 billion in July 15 this year.

“I think by now, the foreign reserves might have fallen to below US$100 billion now and even if the country continues to use its foreign reserves to try to stop the currency from sliding further, it would not be successful,” he said.

Lim said it is inevitable that the ringgit value will continue to slide due to the fundamental financial defects and mismanagement by the federal government.

“No matter how much money they spend, they won't be able to stop it from dropping further,” he said. - TMI