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Don't confuse rakyat on foreign reserve losses, Dr M tells gov't
Published:  Dec 24, 2017 6:15 PM
Updated: 11:53 AM

Former prime minister Dr Mahathir Mohamad has told the government not to confuse the people on Bank Negara’s foreign reserve losses between 2013 and 2015.

Mahathir said this in response to Finance Minister II Johari Abdul Ghani’s statement blaming the losses on outflows due to external factors.

In a posting on his blog today, Mahathir said the losses were due to Bank Negara selling its foreign currency reserves in order to prop up the ringgit, which was devaluing at the time due to flagging market confidence.

“(Bank Negara’s) 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.

“To sustain the value of the ringgit, Bank Negara must buy the ringgit, i.e., show there is a demand for the ringgit,” he said.

The now Pakatan Harapan chairperson said that to do so, Bank Negara would have had to trade US dollars from the national reserves to buy devalued ringgit, which is only sustainable for a time.

“The ringgit value may be sustained. But continued lack of confidence in the market may force further devaluation of the ringgit. 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.

“The outflow of US$39.6 billion can only be caused by Bank Negara selling US dollars from the national reserves, causing the reserve to lose money during the period between 2013 to 2015. This is admitted by Bank Negara itself. This is what happens when the ringgit is allowed to float,” he added.

Mahathir challenged Johari to provide an alternative explanation on how Malaysia’s foreign reserves had shrunk from 2013 to 2015, and why the central bank was trading its US dollars for the ringgit while the private sector was doing the opposite.

Previously, after being implicated in the Royal Commission of Inquiry (RCI) report on Bank Negara’s foreign exchange losses around the early 1990s, Mahathir rebutted that the current Prime Minister Najib Abdul Razak had lost even more money during his tenure.

He said in a video message on Dec 10 that the losses from 2013 to 2015 totalled US$39.621 billion (RM161 billion), compared to the RM31 billion that Bank Negara lost speculating in the forex market during his premiership.

“But for this, there was no investigation (on the losses under Najib’s administration), no RCI, and the answer that was given in Parliament was not satisfactory,” he said.

In response, Johari had claimed these losses were not due to mismanagement, and did not have an impact on Malaysia’s economy.

“The so-called US$39.6 billion loss as alleged was actually an amount that reflected the decline in international reserves due to outflows of foreign funds from Malaysia and not losses due to forex trading.

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

“During this period, capital outflows were not only unique to Malaysia but also affected other emerging markets including Indonesia, Philippines, Singapore, Thailand, India, China, South Korea and Taiwan,” Johari had said in a statement on Dec 19, stressing that the losses were unlike those that took place under Mahathir’s watch.

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