THESE days, it is very heart-wrenching indeed to watch the Malaysian ringgit steadily shrinking against the Singapore dollar – a development that would surely amuse both nations’ founding fathers, namely Tunku Abdul Rahman Putra Al-Haj and Lee Kuan Yew, should both gentlemen were still alive today.
Yesterday (July 25), the ringgit yet again depreciated to its weakest level against the Sing dollar at 3.2154 on the likelihood that the Singapore Central Bank will further tighten its monetary policy in October if inflation pressures persist.
“Since the exchange rate’s close last Friday (July 22) at 3.2032, the ringgit had traded at between 3.2020 and 3.2110 in the morning,” observed theedgemalaysia.com. “It then surged to trade at between 3.2094 and 3.2160 in the afternoon following Singapore’s report on its June inflation data, with core inflation hitting a 13-year high.”
While Malaysians may be more forgiving should the ringgit decline against the greenback or the euro or pound sterling for the matter, the same cannot be say (said) about the Sing dollar given emotional attachment from the past (which dated back to Aug 9, 1965) that is so strong between both countries.
On that eventful date when Singapore separated from Malaysia to become an independent and sovereign state, nobody could have envisaged that the island state would rise from the ashes to become a mighty force in the global economy.
Despite its small domestic market and a lack of natural resources, the Singapore economy is one of the most stable in the world today with no foreign debt, high government revenue and a consistently positive surplus.
Something that only baby boomers and Gen X Malaysians can resonate with is how half a century down the road, one country has achieved top-notch progress from a state of hopelessness while the other is gradually regressing although blessed with an abundance of natural resources.
Especially to the Malaysian elders, external factors whether they are interest rate hikes, inflationary pressures, recessionary concerns or the Russia-Ukraine conflict are not valid excuses for ringgit’s humiliating ‘one-way traffic’ downfall against the Sing dollar since 1965 when both currencies were traded at par (RM1=S$1).
How over the span of half century the ringgit can depreciate by three folds is mind boggling yet not surprising as this hugely reflects gross mis-management of the country from all fronts – whether economically, financially, politically or socially.
Recall that when the ringgit first dipped below RM3 to the Sing dollar on Aug 24, 2015 amid the intensifying 1MDB (1Malaysia Development Bhd) scandal whereby the then Prime Minister Datuk Seri Najib Razak responded by reshuffling his cabinet.
This has undeniably eroded investor confidence in Malaysia back then with the ringgit being the worst performing Asian currency over the previous 12 months.
The weakness of the ringgit was further compounded by weak oil prices, increased fears of higher fiscal deficit for 2015 and concerns over Malaysia’s rising external debt. This led to institutional investors fleeing the ringgit in view of low Malaysian central bank reserves and fears of capital control being implemented like in 1998 during the Asian Financial Crisis.
While external factors may be contributing factors to the current ringgit rout, most of the core factors are very much self-inflicted, ie by allowing corruption to rear its ugly head by not criminalising and daringly putting the highly-famed offenders behind bars (but instead allowing them to roam free on bail or pending court appeal). – July 26, 2022
