THE USD-MYR exchange rate recently touched RM4.80 causing much debate among Malaysians who are asking what is the Madani government is doing to push the ringgit back upwards.Analyst Dr Ahmad Zaharuddin Sani Sabri is suggesting a fixed exchange rate system that would end the volatility of the ringgit, adding that several factors are contributing to exchange rate fluctuations.“While a floating exchange rate allows for flexibility, the current uncertainties may warrant a reevaluation of the benefits of a fixed exchange rate system.“Reflecting on Malaysia’s history post-1998 reveals the nation’s resilience in the face of economic challenges. A fixed exchange rate system during that period provided stability, and revisiting such a strategy could draw upon past successes to navigate the current economic uncertainties,” he said.“One of the primary concerns with a depreciating currency is its impact on inflation and purchasing power. A fixed exchange rate system has the potential to mitigate these concerns, offering Malaysians a more predictable economic environment and safeguarding against the rising cost of living.”He added that examining the measures implemented by the unity government particularly through the actions of Bank Negara Malaysia (BNM), the authorities have adopted a proactive approach to economic challenges.“Consideration of a fixed exchange rate system could align with broader stability measures, reinforcing the nation’s economic resilience,” he claimed.Dr Ahmad also stated that a fixed exchange rate system can enhance investor confidence by providing a stable economic environment.While public sentiment plays a crucial role in shaping economic outcomes, a move towards a fixed exchange rate system can instill confidence among the Malaysian public.“This positive sentiment can translate into increased consumer spending and a more buoyant economic atmosphere,” he told FocusM. – Feb 25, 2024
