The government could have avoided the unpopular decision to increase fuel prices if measures were taken to strengthen the ringgit, said former prime minister Dr Mahathir Mohamad today.

He said that if the ringgit was strengthened, then Malaysia would not been so adversely affected by the rise in global oil prices.

"I think our money is undervalued. If we strengthen our currency, we need not actually (have to) increase the price of oil," he was quoted as saying by Bernama.

"By strengthening our currency, the price of oil actually will not go up so high," he added.

However, he did not elaborate on how the value of the ringgit could be strengthened. But he did hint that if Malaysia repegged its currency or opted for a free float, the ringgit could end stronger.

The ringgit has not strengthened substantially despite the removal of the peg of RM3.80 to the US dollar in favour of a managed float since last July.

When the peg was abolished, estimates of the ringgit's fair value by banks and research houses range from RM3.30 to the dollar to RM3.60, however it is currently at RM3.70.

Mahathir had, against advice from the International Monetary Fund, pegged the ringgit to the US dollar on Sept 1, 1998.

The measures were implemented to eliminate offshore trading in the ringgit and insulate the economy from the effects of short-term speculative capital flows which triggered the 1997/98 Asian financial crisis.

Not so much

Nevertheless, Mahathir considered this month's sharp hike in petrol prices - of between 18.5 percent and 23 percent - as not "so much".

"I think the hike in oil prices in Malaysia is not so much but we can avoid the hike through some other ways," he said.

According to Mahathir, any big increase in crude oil prices in the United States will directly affect local fuel prices, given the ringgit's heavy reliance on the US currency despite that the local unit has been floating against a basket of currencies.

"So when the price of oil in US currency suddenly goes up, the price in Malaysia goes up," he said. "But if we strengthen our currency, the effect of prices in US dollar need not cause a big increase of oil prices in Malaysia."

However, he was not surprised by reaction of many Malaysians to the price hike.

"I suppose in Malaysia we are not used to any increase in the prices. So we do not take it as something natural," he said. "But in many countries prices go up all the time.".

Over the past few years, crude oil price in the global market has increased from US$30 to US$70 a barrel.

In less than two years, petrol price in Malaysia has gone up by 40 percent while diesel now costs 102 percent more.