PUTRAJAYA: Prime Minister Dr Mahathir Mohamad says there is no need to peg the ringgit at the moment although the government will study this as an option if necessary.
He told Channel NewsAsia (CNA) in an interview that the government was also mulling going cashless or changing currencies in a bid to combat corruption.
“We are studying how best to reduce corruption, certainly, and how best to keep track of money that is being spent, especially by the government,” he said in the interview broadcast yesterday.
“At the moment, there is no need (to peg the ringgit). But we will have to study that also. That is one of the options that we have.”
The ringgit was quoted at 4.0180/0230 today against the greenback from 4.0160/0190 recorded at yesterday’s close.
At the height of the Asian Financial Crisis in 1998, Mahathir famously pegged the currency to the US dollar – a controversial move at the time that was eventually credited for helping to stabilise the economy.
Now back as prime minister again, Mahathir and his new government have been accused of spooking investors with revelations of financial scandals as well as debt and liabilities of more than US$251 billion (RM1 trillion), or 80.3% of the country’s GDP.
Finance Minister Lim Guan Eng has defended exposing this, telling CNA that in the long term, transparency would make Malaysia more attractive to investors.
“It’s not an easy thing because when you want to replace currency, you must know how much currency is in circulation… because we have to replace what is in circulation and that is a very big amount,” said Mahathir.
“If you were to replace, you need to print huge amounts of paper money… but that is not a decision that one makes lightly. You have to study the effect on the economy.”
Mahathir said his government had not fixed a timeline to make a decision on this but would implement what is best for Malaysia “as we study”.
Reducing debt to RM300 billion
Mahathir also said his government would like to reduce the nation’s debt “to the amount that was incurred by, maybe, (the amount it was) before I stepped down (as prime minister in 2003) – about RM300 billion”.
“That will be much less than the GDP per year,” he said.
“But we know that we have more than RM1 trillion (in debt and liabilities) so we have to reduce it to maybe RM500 billion or so… but we don’t know yet.”
He said he hoped to have made some headway in reducing the debt within a year.
“We have to pay, of course, not only interest but principle payments… we are thinking that if we can source some cheap money, we use that money to retire some of the high cost borrowings so that we still have the money, we still have the loans, but it costs us much less,” he said.
So far, Mahathir said, his government had reduced the nation’s debt by some RM200 billion after cutting down on borrowings.
“Those borrowings which are not yet off the ground, we stop. For example, the (Kuala Lumpur-Singapore) High-Speed Rail,” he said of the cost-cutting measures.
“We don’t really need the high-speed rail, we can postpone it to some other time because we don’t have the money. That reduces the amount of borrowings that we have.
“And then we have the (China-backed) East Coast railway… we find that the agreement is such that we cannot just drop it so we may have to continue with it.
“And if we continue with it, we have to reduce the cost of this railway.”
The size of the government, too, will be smaller compared to the last in a bid to save costs. Mahathir told CNA his Cabinet would have around 29 people, compared to more than 40 in Najib Razak’s.
“We don’t spend money on trying to be popular,” he said.
“This government will be a much leaner government so money will be spent only when needed.”