THE government will not peg the ringgit to the US dollar as it did during the Asian financial crisis in 1998, Deputy Finance Minister Ahmad Maslan told the Dewan Negara today.

He said any move to peg the local note will make Malaysia lose its ability to manage its monetary policies, thus potentially leading to a further increase in the overnight policy rate (OPR).

“Our OPR is now at 3%, and the OPR in the United States is 5.25%,” the Pontian lawmaker told the chamber during question time.

“If we peg the ringgit at 3.80 to one US dollar, then our OPR would need to be raised to 5.25%.

“Even now with our OPR at 3%, the people already feel very uncomfortable. It would be worse if it were to be raised to 5.25%.”

Last month, Bank Negara Malaysia increased the OPR by 25 basis points, realigning it with pre-pandemic levels at 3%.

Ahmad was responding to a question from Shamsuddin Abd Ghaffar, who asked if the government plans to peg the ringgit to the US dollar as it did in 1998.

Ahmad said Malaysia would lose its freedom to implement its own monetary policies if it pegs the local currency.

“That’s the disadvantage if we peg the ringgit to the US dollar,” he said.

“Apart from that, we would need huge amounts in international reserves if we are to peg the currency to the relevant value.

“Also, the capital flow control will not be free because any entry or exit of foreign investment will be controlled.

“Hence, it is not good as it will affect our competitiveness at the international level.”

In 1998, during the Asian financial crisis, Malaysia had pegged the ringgit at 3.80 to the U.S. dollar in an effort to protect the Malaysian economy from external vulnerabilities and restore financial stability.

The measure was kept in place until 2005. – June 20, 2023.