By Fathol Zaman Bukhari
I never realised the enormity of the RM’s (Ringgit Malaysia) value till reality hit squarely in my face. I was at Ipoh’s more popular money changer along Jalan Yang Kalsom recently to acquire some NTD (New Taiwan Dollar) for my year-end trip abroad. The official rate on that day was 7.34 Taiwan dollars to one Malaysian ringgit. The changer’s rate was obviously much lower as it is his business.
The guy at the counter quoted 6.9 Taiwan dollars to a ringgit. I was hesitant to transact thinking that the rate would go up, as that was the trend that day. But his answer was something unexpected. “Uncle, the ringgit’s rate is very volatile; it may go up or down anytime. You better change now as I can’t guarantee the rate even by lunchtime today.”
It has been a roller coaster ride for our currency. The RM, over a period of time, has acquired a notoriety not seen since it was pegged at RM3.80 to the US dollar by Mahathir following the financial crash in the early 1990s. It clawed its way to RM3.20 to 1 USD after stagnating for nearly a decade. Now it is free-falling like nobody’s business. In fact the RM is the worst-performing denomination in Asia.
I thought the honour belongs to the Thai Baht and the Indonesian Rupiah but surprisingly these two currencies fared far better. A friend complained that the traders at the border towns of Betong, Pekan Siam and Hatyai had stopped taking the ringgit in their daily dealings preferring the baht over the ringgit. This is a slap on our face considering the disdain we have had for our neighbours’ currencies.
Bank Negara Malaysia (BNM), our central bank, is never short of excuses. It has constantly reminded Malaysians that the country’s economic fundamentals are strong and as such the ringgit’s value will stand the test of time regardless of external pressures beyond the regulatory bank’s control. In spite of all the assurances the ringgit’s value continues to spiral downwards.
Bank Negara Malaysia, after much soul-searching, initiated new measures to encourage domestic trade of the ringgit and to stem its slide against the Greenback. Effective Monday, December 5, exporters could only retain up to 25 per cent of export proceeds in foreign currency while the remaining 75 per cent must be in RM. Previously it was limitless.
As a sweetener, to keep more cash at home, proceeds from exports would earn an interest of 3.25 per cent per annum. The new measure, according to BNM, works but to what extent? Why now when the local currency has been free-falling for over a year? It is a clear case of too little too late.
Will the long-suffering rakyat be relieved of this curse? I have a nagging feeling that we will be in the rut far longer than most have anticipated. The reason is obvious but few want to dabble in it for fear of being branded a “traitor”. No, not with the Sedition Act looming on their conscience.
Former Finance Minister Tun Daim Zainuddin has openly said that the poor performance of the ringgit is not caused by external pressures but poor governance.
“It’s a crisis of confidence,” he told reporters during a media interview recently. His finding was confirmed by prominent Malaysian economist, Jomo Kwane Sundaram, who attributed the problem to a “confidence deficit arising from the 1MDB scandal”.
Jomo did not mince his words when he told the Edge on Thursday, December 8.
“Over the last one-and-a-half years or so, the ringgit has been steadily declining. This cannot be simply attributed to the collapse in the price of crude oil. There’re many factors behind it, including a loss of confidence in the government as more and more revelations are made about 1MDB.”
The performance of stocks is a good analogy. Trading increases when market players perceive the stocks are from well-managed entities with solid backing while the dubious ones are being shunned. That in short is what happening to our battered ringgit. And no solution is in the offing until, of course, the inevitable happens. You know what I mean.
While we wallow in our sorrows those earning Singapore and American dollars are laughing all the way to the bank.
By Fathol Zaman Bukhari