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Dr M: Currency peg should be reviewed
Published:  Jan 20, 2005 10:08 AM
Updated: Jan 29, 2008 10:21 AM

Former premier Mahathir Mohamad, the man who controversially pegged the country's currency to the US dollar in 1998, says it is time to review the peg, the official Bernama news agency reported yesterday.

The weak dollar had caused the Malaysian ringgit to depreciate against major currencies, Mahathir said, adding: "I feel the time has come for us to review because we have lost a lot as the value of our currency has fallen."

Mahathir defied International Monetary Fund (IMF) prescriptions to peg the ringgit at 3.80 to the dollar and impose capital controls during the 1997/98 Asian financial crisis. He was speaking to reporters after talks with former World Bank chief economist Joseph E Stiglitz.

The IMF has since acknowledged that Mahathir's actions enabled the country to weather the crisis better than many of its neighbours.

But Mahathir, joining a growing chorus of calls for a review of the peg, said the sharp decline in the value of the dollar meant it was now costlier to import products from Japan, Europe and elsewhere.

No immediate plans

The government has said it has no immediate plans to drop or modify the peg but pressure for change has led to an inflow of funds from overseas speculators hoping to take advantage of any upward shift in the ringgit's value.

Speculation that China may adjust its own currency peg to the dollar and allow the yuan to rise has lent strength to the belief that Malaysia may follow suit. Its economy has recovered strongly and exports are at a record high.

"From the onset, we have said that although we have a fixed exchange rate, we can fix it at any level we want," Mahathir said. "That is the most important thing... the freedom to fix the exchange rate."

Mahathir, who retired in October 2003 after 22 years in power, said it was up to the government of his successor Prime Minister Abdullah Ahmad Badawi to evaluate the situation.

"Now the ringgit is depreciating as the (US) dollar is falling. The Singapore dollar has appreciated. Whether this is good or not good is up to the government to study," he said.

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