Dr M: Reserves losses anytime bigger than forex losses

Former prime minister Dr Mahathir Mohamad has dismissed Second Finance Minister Johari Abdul Ghani’s explanation on Bank Negara’s foreign reserves losses between 2013 and 2015.

He insisted that Johari has not explained the loss of US$39.6 billion (RM161 billion) during that period.

“Call it whatever you like, but the fact remains that as far as our reserves were concerned, Bank Negara lost more than seven times the amount we lost 30 years ago (from foreign exchange speculation).

“And the loss was due to trading in US dollars for the ringgit. If it was not due to trading, then what caused the loss in reserves? This Johari has not answered,” Mahathir said in a blog post today.

Mahathir and Johari have been trading barbs since early-December last year on two issues - Bank Negara’s foreign exchange losses in the early 1990s, which amounted to RM31.5 billion, and the central bank's foreign reserves losses between 2013 and 2015.

Mahathir, who has been implicated by a royal commission of inquiry into the forex losses, has argued that the central bank's foreign reserves losses between 2013 and 2015 also deserve in-depth scrutiny.

Johari had said that the RM161 billion foreign reserves loss was not due to mismanagement, unlike the forex losses which he said were due to currency speculation.

He said currency speculation was akin to gambling, and thus was outside Bank Negara’s mandate, whereas the foreign reserves losses between 2013 and 2015 were to facilitate liquidity and mitigate imbalances in the supply and demand of the ringgit.

The latter was part of the orderly management of the foreign exchange market, he added.

In his blog post today, the Pakatan Harapan chairperson said the foreign exchange measures in place between 2013 and 2015 must have "failed repeatedly," as the value of the ringgit compared to the greenback was still low.

The ringgit is currently trading at RM4.0325 to the dollar.

“The large loss may be due to normal management. But big sums must have been involved for the total to be so big. It cannot be just because Bank Negara followed the trend in the outflow of funds from Malaysia.

“Actually, Bank Negara’s duty is to halt the outflow, not to enhance it. The only reason for Bank Negara to liquidate foreign currency in its reserves is to support the ringgit's value by buying it,” he said.

He added that following the 1997 Asian Financial Crisis, Malaysia stopped using its foreign reserves to prop up the ringgit after suffering losses amounting to RM11 billion, which showed that the policy was not working.

However, between 2013 and 2015, Mahathir said Malaysia suffered foreign reserves losses amounting to RM161 billion, which was suspect.- Mkini