The Ringgit's Slide: Shattered confidence due to flip-flopping

27 Jun 2023 08:19am
Illustrative purpose (123rf)
Illustrative purpose (123rf)

In the past year, the Malaysian ringgit has lost approximately 10 per cent of its value against the US dollar.

This decline has been attributed to several factors, including the government's inconsistent economic policies and its handling of the 5G network.

One of the most concerning examples of the government's inconsistency has been its handling of the Single Wholesale Network (SWN).

Initially, the SWN was designed to be a single entity responsible for providing wholesale 5G services to all mobile operators.

However, the government later changed its approach and decided to implement a dual-operator model, with two separate entities providing wholesale 5G services.

This decision was met with criticism from businesses and investors who argued that it would create unnecessary duplication and increase costs.

The government's inconsistency on economic policies has also been evident in its approach to fiscal spending. In the past year, it has announced several stimulus packages aimed at stimulating the economy.

However, these packages have been criticized for being too small and poorly targeted, resulting in little impact on investor confidence.

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The government's handling of the 5G network has also raised concerns among investors. In 2020, it awarded a contract to Ericsson to build the country's 5G network.

However, it later decided to review the contract and is now considering awarding it to another company. This decision has raised questions about the government's commitment to transparency and predictability.

The decline of the ringgit has several implications for the Malaysian economy.

Firstly, it makes importing goods and services more expensive for businesses, which could lead to higher prices for consumers

Secondly, it makes Malaysia less attractive to foreign investors, potentially slowing down economic growth.

Thirdly, it could result in a decline in the value of Malaysian assets such as stocks and property.

To restore confidence in the economy, the government needs to provide more transparency and predictability in its decision-making and implement sound economic policies. It also needs to address concerns about the 5G network raised by businesses and investors.

Taking these steps will help stabilize the ringgit and boost economic growth. In addition to qualitative evidence, there is also hard data supporting the claim that the government's inconsistency has contributed to the decline of the ringgit.

A recent study by the Economist Intelligence Unit found that Malaysia's economic policy uncertainty index has increased significantly in recent months. This index measures uncertainty about government economic policies and is a leading indicator of currency volatility.

Furthermore, compared to other currencies in the region, the ringgit has depreciated more against the US dollar. While it has depreciated by approximately 10 per cent in the past year, other currencies such as the Thai baht and Singapore dollar have only depreciated by about 5 per cent and 2 per cent, respectively.

This suggests that the government's inconsistency has had a disproportionate impact on the ringgit. In conclusion, the decline of the ringgit is a serious concern for Malaysia's economy.

To restore confidence, the government must provide more transparency and predictability in its decision-making. Taking these steps will help stabilise the ringgit and boost economic growth.

Datuk Mohd Imran Tamrin is a practising lawyer and Sungai Panjang state assemblyman.

The views expressed in this article are the author's own and do not necessarily reflect those of Sinar Daily