Bank Negara, government undertaking coordinated actions to spur "sustained" fund inflows

KUALA LUMPUR: Bank Negara Malaysia and the government are undertaking coordinated actions to further increase flows into the foreign exchange market on a sustained basis, its governor Abdul Rasheed Ghaffour said. 

Abdul Rasheed said the central bank has elevated its engagements with government-linked companies (GLCs) and government-linked investment companies (GLICs) to encourage more consistent repatriation and conversion of their foreign investment income. 

"We are also stepping up our engagements with international investors, such as yourselves, to showcase the positive prospects of Malaysia and that Malaysia remains highly attractive for investment and business. 

"Thus, with the current ringgit undervaluation and ongoing and forthcoming investment opportunities, global investors stand to reap the benefits from participating in Malaysia's growth prospects," he said in his keynote speech at the Third Fitch Ratings Islamic Finance Symposium 2024. 

Abdul Rasheed said the government is also committed to ensuring fiscal sustainability through several fiscal reform initiatives.  

This includes rhe Public Finance and Fiscal Responsibility Act (FRA) and the Medium Term Fiscal Framework (MTFF) which will support the paring down of the fiscal deficit to between three per cent and 3.5 per cent of gross domestic product (GDP) by 2025.  

"This will be supported by both revenue enhancements and expenditure optimisation, including broadening the tax base," he added. 

Abdul Rasheed reiterated that the ringgit has been under pressure since 2022, largely influenced by the aggressive policy rate adjustments by the US Federal Reserve.  

This phenomenon is not specific to Malaysia but reflects broader currency market dynamics.  

"Given our positive growth prospects, the current ringgit level is undervalued.  

"This is unwarranted, as the ringgit is also supported by sustained investor confidence, evidenced by the stable long-term government bond holdings by non-residents at around 22 per cent, and recent foreign inflows into domestic equities. 

"We are highly resolved to ensure that the ringgit remains stable," he added. 

The Malaysian economy is projected to grow at four to five per cent in 2024, supported by robust domestic demand and an improvement in the external sector.  

Abdul Rasheed said the improving global economy together with the tech upcycle are benefitting our exports, especially since Malaysia is a dominant player in the global semiconductor industry. 

He added that a key strength of Malaysia is our external sector resilience.  

"This is contributed by a current account surplus, a manageable level of external debt, a net external asset position and an adequate level of international reserves.  

"This has enabled Malaysia to weather the volatile global financial conditions from a position of strength, and has ensured the domestic financial markets continue to remain orderly," he said.

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