THE Government has been again urged to intervene over the ringgit’s rapid descent, which dropped to a 24-year low of RM4.54 against the US dollar yesterday (Sept 16) even as analysts forecasted the ringgit to decline further next week.
The ringgit also recently dipped to a historic low of RM3.26 against the Singapore dollar while the Indonesian rupiah has appreciated by more than 4% this year against the ringgit.
“Whether this depreciation of the ringgit value against three of our major trading partners is considered by the Government to be a crisis or not, it must adopt structural economic reforms immediately to arrest the ringgit’s rapid descent,” DAP chairman Lim Guan Eng said.
If the Government fails to do so, there will be adverse repercussions on inflation for businesses, cost of living to the rakyat and Government debt denominated in US dollars, the former finance minister said in a statement today.
The ringgit hit another new low since the Asian Financial Crisis on Thursday (Sept 15), trading at 4.5340/5365 against the US dollar compared with 4.4965/4990 at last Friday’s (Sept 9) closing.
For the shortened trading week, the local currency also traded mostly higher against a basket of major currencies – including the British pound (to 5.2214/2242 from 5.2249/2278), euro (to 4.5317/5342 from 4.5361/5386) and Japanese yen (to 3.1647/1666 from 3.1670/1690).
Earlier today, Bernama reported that the ringgit is expected to see further declines against the greenback at around the 4.50-4.60 levels next week on a lack of catalysts and ahead of the US central bank’s decision on interest rates.
This is because investors are holding off on buying interest in emerging markets (EM) assets and would remain focused on safe-haven assets such as the US dollar amid rising inflation worries, including in EM economies.
The expectation of another increase in the interest rate by the US Federal Reserve in the Federal Open Market Committee (FOMC) meeting next week is also weighing on the ringgit, according to an unnamed analyst that the national news agency spoke to.
“Extra RM7.7 bil needed to repay the principal of 1MDB bonds”
Lim, meanwhile, said the Government will have to pay an extra RM7.7 bil to repay the principal of the three tranches of US dollar bonds totalling US$6.5 bil that the Goldman Sachs bank had arranged for 1Malaysia Development Bhd (1MDB), as a result of the latest currency exchange.
The US$6.5 bil dollar bonds issued in 2012 (US$1.75 bil at 5.75% per year and US$1.75 bil at 5.99% per year) and 2013 (US$3 bil at 4.4% per year) are due in 2022 and 2023, respectively, when the strength of the US dollar will be at its highest in 24 years.
“At RM3.35 to the US dollar when the three 1MDB US$ bonds were issued, the principal amount of US$6.5 bil would come up to about RM21.8 bil.
“At the current exchange rate of RM4.54 to the US dollar, the principal amount due for the US$6.5 bil would be higher at RM29.5 bil – or RM7.7 bil more,” Lim said.
Cumulative interest, on the other hand, would have totalled just over RM1 bil a year and RM10.5 bil in the past decade.
With a weaker ringgit this year, however, Lim said the annual interest cost would be around RM1.5 bil instead of RM1 bil.
“Why do UMNO leaders and Prime Minister Datuk Seri Ismail Sabri Yaakob choose to remain silent about these huge billion ringgit losses from the depreciating ringgit?” he asked.
Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz has since said that Malaysia is not experiencing an economic crisis just because the ringgit is trading at a low level against the US dollar.
He explained that the ringgit’s performance should be viewed holistically, not just in comparison with the US dollar, as the local note has strengthened against other currencies.
Tengku Zafrul also stressed that the International Monetary Fund (IMF) never stated that Malaysia has economic problems that would cause the country to go bankrupt; instead, it said it was confident in the country’s growth prospects. – Sept 17, 2022.
Main photo credit: Malay Mail