Mahathir claims BNM under Najib sold USD from national reserves

PETALING JAYA: Dr Mahathir Mohamad has accused Finance Minister II Johari Abdul Ghani of trying to confuse the public by attributing Bank Negara Malaysia’s (BNM) “losses” worth US$39.6 billion (RM161.6 billion at the present exchange rate) from 2013 to 2015 to outflows of foreign funds.

The chairman of PPBM and Pakatan Harapan said the outflows could only be caused by BNM selling US dollars from the national reserves, causing the loss of money.

“This is admitted by Bank Negara itself. This is what happens when the ringgit is allowed to float,” he claimed.

“Can Mr Johari explain how else the reserves can shrink?

“Can he explain why Bank Negara has to follow the trend and join in the outflow of the US dollar?” Mahathir said in his blog today.

The former prime minister also asked why BNM had sold the dollar for the devalued ringgit when the private sector was selling the depreciating ringgit for the dollar.

On Dec 19, Johari had said the losses were due to outflows of foreign funds and not caused by foreign exchange (forex) trading.

He said the outflows were in turn due to concerns over weak global growth prospects, anticipation of monetary policy normalisation in the US and a sharp decline in global oil prices.

Johari had said this in response to an assertion by Mahathir on Dec 10 that the US$39.6 billion lost was a much larger amount than what BNM was said to have lost in the forex trading under his rule as prime minister in the early 1990s.

Mahathir had said there was however no royal commission of inquiry (RCI) to probe the losses between 2013 and 2015 which took place under Prime Minister Najib Razak’s leadership, unlike the recently concluded RCI over the 1990s forex losses.

The 92-year-old added today that while foreign investors did liquidate their holdings in Malaysia to take out their money when the ringgit depreciated from 2013 to 2015, BNM was holding foreign currencies in the form of US bonds.

“Its duty is to sustain the value of the Malaysian ringgit should the market lose confidence in the government’s management of its finances, among other things,” he said.

To do this, BNM must buy the ringgit and show there is a demand for the currency, he added.

“But with what can Bank Negara buy the ringgit? The obvious source is the foreign currency reserves it is holding. Effectively, Bank Negara is trading US dollars from the national reserves for the devalued ringgit,” he said.

Mahathir said while the ringgit’s value may have been sustained initially, continued lack of confidence in the market may have forced its further devaluation.

“And Bank Negara would have to use more US dollars from the reserves to support the ringgit. As we all know, the ringgit did not recover during those years,” he said. -FMT