Bank Negara should align itself with the new policies of the new unity government of Prime Minister Anwar Ibrahim by focusing on his 3 key priorities of reining in any increases of cost of living, generating economic growth in the face of a global slowdown and combating corruption. Bank Negara had highlighted six key policy priorities for reforms, namely, digitalisation; fiscal resilience; climate resilient economy; growth potential; future-ready workforce; and social protection.
Whilst the 6 key structural reforms proposed by Bank Negara Governor Tan Sri Nor Shamsiah Mohd Yunus to enhance Malaysia’s competitiveness and growth potential is a desired long-term goal, the three key goals of Anwar should be prioritised to ensure the stability of the unity government from being undermined by racists and extremists. Bank Negara should actively assist the government to establish political stability to reassure investors of a progressive, competent, transparent and inclusive government instead of an extremist, racist and incompetent, dishonest government devoid of any rational economic planning.
The first step that Nor Shamsiah should do is to arrest any increase in cost of living by continuing its pause of any increases in the Overnight Policy Rate(OPR) to cushion individual and business borrowers from any added financial costs. With inflation moderating to 3.7% in February 2023, there is no need for any interest rate hikes.
Further, the interest rate pause by Bank Negara has NOT caused the value of ringgit to depreciate against the US dollar, which has appreciated from a low of RM 4.75 under the previous administration to RM 4.41 today. In other words, hikes or cuts in the OPR have no discernible effect on the value of the ringgit against the US dollar, which is determined by external factors beyond the country’s control. Bank Negara should show it has a heart for small businesses and individuals by continuing its pause of any hikes in the OPR.