Economic Minister Mustapa Mohamad’s indifference towards the financial pain borne by the rakyat from the rise in Malaysia’s annual inflation rate to a 16-month high of 4.7% in August of 2022 from 4.4% in July whilst food inflation rose by 7.2% as compared to 6.9% in July, is as disappointing as the government’s poor economic management. Mustapa’s failure in managing the economy and Annuar Musa’s failure to check inflation as the Chairman of the Special Cabinet Task Force on Jihad against Inflation formed in June, has caused Bank Negara to raise the Overnight Policy Rate (OPR) resulting in borrowers having to pay higher interest costs.
Since the increase in OPR to 2.5% was made before the latest August inflation data was available, Bank Negara is expected to increase the OPR further by November this year and January next year to 3%, thereby imposing heavier financial burden on Malaysians and businesses. Unless Prime Minister Ismail Sabri replaces failed economic managers and inflation fighters, Malaysians will have to bear more financial pain.
Apart from failing to check rising inflation and food prices increase from 3.4% and 6.1% respectively in June to 4.7% and 7.2% in August 2022, Annuar Musa irresponsibly dismissed the current decline in the value of the ringgit against the US dollar as only temporary. How can the decline be temporary when the US dollar has dropped to a new 24-year low of RM4.58 today?
The current decline of value of the ringgit against the US dollar is not temporary as the Ringgit has weakened by almost 10% this year from RM4.17 at the end of 2021. Malaysians are forced to pay higher import costs and the Malaysian government is repaying higher for the US-denominated loans, especially the US$6.5 billion 1 MDB loans, which are definitely not temporary in nature as the losses cannot be recouped.
Annuar Musa is wrong to imply that the decline in the value of the ringgit is principally against the US dollar, when the ringgit has also declined against our country’s two other major trading partners. Against the Singapore dollar, the ringgit has recently dipped to a historic low of RM3.26 whilst the Indonesian rupiah has appreciated by more than 4% this year against the ringgit.
Is dismissing the depreciating ringgit as temporary a feeble excuse not to do anything because the government simply does not know what to do or is too lazy to heed suggestions of carrying out structural economic reforms. Bank Negara governor Nor Shamsiah Mohd Yunus said yesterday, “Rather than resorting to capital controls or re-pegging the ringgit, the policy priority now is to sustain economic growth in an environment of price stability and to further strengthen domestic economic fundamentals through structural reforms. This will provide a more enduring support for the ringgit.”