by ASILA JALIL  / pic by MUHD AMIN NAHARUL

FORMER Prime Minister Tun Dr Mahathir Mohamad (picture) hinted the ringgit should be repegged at RM3.80 against the US dollar to stabilise the exchange rate. 

The local unit was pegged against the greenback more than 20 years ago as the country grappled with the effects of Asian Financial Crisis.

“When we set the value of ringgit at RM3.80 against the dollar and guarantee the supply of dollars to anyone who is willing to pay RM3.80 for US$1, the value of ringgit will no longer fluctuate.

“This would also disable currency traders from devaluing the ringgit by selling it in large quantities,” Dr Mahathir said in a statement yesterday.

He added the ringgit is fluctuating because the value is not set and guaranteed by the government.

Despite the increase in trade, which contributes to the domestic economy, the nonagenarian said the value of the ringgit is unable to stabilise amid the Covid-19 pandemic.

“For traders who import materials or borrow in US dollars, the depreciation of the ringgit against the dollar will increase the ringgit’s production costs as well as the product’s market price. Due to this, the new selling price has to take into account the value of the ringgit against the dollar.

“However, do not talk about the fixed exchange rate. It is taboo, illegal. Yes, in 1997-1998 the fixed exchange rate saved us. But that was because politicians did not understand the financial market,” he said.

Dr Mahathir stated his move to peg the ringgit to the dollar at RM3.80 two decades ago was heavily criticised but financial institutions such as the World Bank and International Monetary Fund acknowledged the policy stopped fluctuations in the value of the ringgit.

The former premier pegged the ringgit at RM3.80 to the US dollar in 1998 due to the decline in Asian currencies. He blamed speculators for causing a financial crisis in the region.

At 16.15pm today, the local unit stood at 4.376 versus the greenback after Bank Negara Malaysia raised its benchmark Overnight Policy Rate this afternoon by 25 basis points to 2%.

Analysts have projected for the ringgit to stay weak in the near-term as the US Federal Reserve is expected to aggressively tighten its monetary policy towards normalisation post-pandemic and to fight off inflationary pressures.