Finance Minister II Johari Abdul Ghani said the amount cited by PPBM chairman and former prime minister Dr Mahathir Mohamad reflected the decline in international reserves due to the outflows.
He said the outflows were in turn due to concerns over weak global growth prospects, anticipation of monetary policy normalisation in the US and a sharp decline in global oil prices.
“During this period, capital outflows were not only unique to Malaysia but also affected other emerging markets, including Indonesia, Philippines, Singapore, Thailand, India, China, South Korea and Taiwan.”
He said these external factors had pushed foreign investors to liquidate their investments in Malaysian stock and bond markets.
“This in turn led to greater demands for the US dollar vis-à-vis the ringgit when foreign investors converted such funds into the US dollar and repatriated the same to their respective countries,” he said in a statement today.
He said BNM had during this period provided dollar liquidity to foreign investors in exchange for the ringgit, which was different from the heavy speculative forex trading activities undertaken in the early 1990s when Mahathir was prime minister.
Johari said the facts of the matter needed to be set right as Mahathir’s allegation in a recent online video posting had caused much consternation among the public.
In the video on Dec 10, Mahathir, who was prime minister from 1981 to 2003, had said that the US$39.6 billion lost was a much larger amount than what BNM was said to have lost in the forex trading under his rule.
The 92-year-old said there had however been no royal commission of inquiry (RCI) to probe the losses between 2013 and 2015 which took place under Prime Minister Najib Razak’s leadership.
Johari said Malaysia’s international reserves had since been on the increase, standing at US$101.9 billion (RM415.8 billion) at the end of November.
He said the current reserve management system by BNM had worked well, with financial markets being orderly and stable despite large capital outflows.
“Given our solid fundamentals, the decline in reserves during the period 2013-2015 had no material impact to the functioning of the Malaysian economy as well as the financial position of the central bank.
“In fact, BNM continues to record healthy net profits throughout the period, unlike in 1993 when a net operating loss was recorded due to speculative forex trading activities,” he said.
Johari also said international reserves remained a crucial buffer against external shocks and were essential in maintaining a stable operating environment in the domestic economy.
Mahathir, 92, today filed a suit to declare the report by the RCI on BNM’s forex trading losses, which concluded earlier this month, as null and void as it excluded legal documents of witnesses and notes of proceedings.
See-To: Wrong of Mahathir to link forex scandal with forex trading