China, Chile policies inspired me in dealing with ’97 crisis, says Dr M

KUALA LUMPUR: Dr Mahathir Mohamad who was largely credited with battling the 1990s currency crisis by imposing a peg on the ringgit, today said he was inspired by policies implemented by China and Chile in dealing with the economic crisis two decades ago.

The prime minister said his government was already convinced that the East Asian currency crisis in 1997 was the work of currency traders, and decided to impose the currency peg to stop speculation on the ringgit.

“We learnt this from China and Chile,” he said at the 33rd Asia Pacific Roundtable here.

“The two countries at that time did not allow their currencies to be traded and they became very stable.”

Mahathir said his decision to peg the ringgit to the US dollar was initially criticised.

“But in the end it was acknowledged by the World Bank that it was a good strategy to adopt, and that Malaysia recovered because of that.”

Mahathir said that currency traders would prefer a stable currency.

“They don’t like a fluctuating currency because it is too difficult to even prepare a budget for the year.”