Former Malaysian Prime Minister Mahathir Mohamad has suggested that the country explore pegging its plunging currency to the dollar, a tactic he implemented during the Asian financial crisis in the late 1990s.
"It's something to think about," Mahathir said in an interview on Wednesday in his office in Putrajaya, Malaysia's administrative capital.
According to the South China Morning Post, the ringgit has been the poorest performer in emerging Asia this year, falling about 8% against the US dollar. Last month, it fell to around 4.8 per dollar, the lowest level since January 1998, at the height of the multi-year crisis that roiled Asian financial markets.
The ringgit has been the poorest performer in emerging Asia this year, falling about 8% against the US dollar. Last month, it fell to around 4.8 per dollar, the lowest level since January 1998, at the height of the multi-year crisis that roiled Asian financial markets.
The currency might fall another 5% to a historic low of $5 per dollar, according to Mahathir, who is now 98. "Just imagine what that would mean for your cost of living," he added, adding that pegging the currency would assist to reduce price pressures.
Malaysian equities have suffered this year as rising US interest rates draw investment back to the world's largest economy.
Bank Negara Malaysia has kept its key rate at 3% since July, putting the indicator at a historic discount to the Federal Reserve's benchmark. At the same time, Malaysia's largest commercial partner, China, is experiencing sluggish growth, which has weighed on its exports.
Malaysian policymakers are still dedicated to ensuring that the ringgit adjusts in a timely manner, according to Bank Negara Malaysia Governor Abdul Rasheed Ghaffour last week. "We have been in the markets, and we will, when needed, continue to be in the market," he told reporters.
On Wednesday, the central bank did not respond to a request for comment on a possible ringgit peg.
Malaysia's currency fell during the Asian crisis, putting additional strain on the country's foreign exchange reserves.
Mahathir, who became Prime Minister for the first time in 1981, refused an IMF bailout. Instead, in September 1998, he imposed capital controls and froze the ringgit at 3.8 per dollar, a regime that lasted until 2005.
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