“The ringgit should be stronger than what it is today. According to many analyst reports, the real effective exchange rate for the ringgit should be below RM4 to the dollar,” he told reporters at the exchange’s second quarter financial results briefing today.
“If it’s any other country, the currency should be strengthening. Somehow our currency actually continued to weaken from the moment it was depegged from the US dollar (in 2005).
“When it was depegged at the RM3.80 to US$1 level, it strengthened to 3.2 and then weakened to 4.50 – where we are today,” he said.
The ringgit was pegged at US$1 to RM3.80 on Sept 1, 1998 in an effort to protect the economy from external vulnerabilities and restore financial stability during the Asian Financial Crisis. After almost seven years, it was depegged on July 21, 2005.
The ringgit has been in a free fall this year, and was one of the worst-performing Asian currencies against the greenback.
It fell as much as 6% year-to-date (YTD) but recovered recently, depreciating 2.5% YTD against the US dollar to its current level.
At 6pm today, the local note strengthened to 4.5050/4.5090 against the US dollar compared with 4.5535/4.5565 at Friday’s close.
Wahid, who was a former minister in the Prime Minister’s Department in charge of economic planning, listed several reasons why he thinks the ringgit should be higher.
“Our economic performance is actually very credible, not just in terms of the 4.7% annual growth since the Asian Financial Crisis, but the cumulative trade surpluses since 1998 up to last year, totalling RM2.7 trillion,” he pointed out.
He also said the country’s current account surpluses viewed cumulatively over the past 24 years since 1998 totals RM1.5 trillion.
Current account surpluses refer to positive current account balances, meaning that a country has more exports than imports of goods and services.
He also noted that Malaysia was attracting more inflows of foreign direct investment than the outflow of Malaysian companies investing abroad.
“If we look at all these numbers, the potential for the ringgit to strengthen is significant. We don’t deserve to be where we are today from an economic fundamentals’ perspective,” said Wahid, urging Malaysians to have more confidence in themselves.
On another matter, Wahid said foreign shareholdings in Bursa Malaysia is expected to improve in the second half of 2023 from the 20% at present, prompted by the continuous inflows into the emerging markets, including Malaysia.
“For the month of July, we have seen RM1.1 billion of net inflows, therefore, lowering the net outflow for the year to about RM3 billion.
“As the foreign investors come back into our market, we do expect the 20% foreign shareholding to increase,” he added.