Minister in the Prime Minister’s Department (Economy) Mustapa Mohamed said yesterday that experts from the World Bank provide economic advice to the government. However, there is no point in having expert economists if their advice is not adopted by the government. To shore up the value of the ringgit, the World Bank had recently recommended on 27 September that fiscal and structural economic reforms be carried out from education to improving the investment climate to make Malaysia more productive and competitive.
The World Bank’s advice comes at an appropriate time following DHL Express Malaysia’s announcement on 26 September of an average price increase of 7.9% in 2023 compared to 2022 due to rising inflation and depreciating ringgit. The reason cited by DHL for imposing an increase next year in logistic cost essential for the exports industry, especially manufacturing, is a sure sign of failure by the government to check inflation as well as arrest the decline in the value of the ringgit.
If industries have no confidence in the government’s inflation fighting measures, why is a failed Minister like Annuar Musa still hanging on as Chairman of the Special Cabinet Task Force on Jihad Against Inflation? Annuar should have resigned in disgrace or asked the Prime Minister to take over as Chairman.
As a result of Annuar’s failure to stem inflation, Bank Negara has increased the Overnight Policy Rate(OPR) by 25 basis points to 2.5%. Bank Negara also has no confidence in Annuar’s ability to fight inflation and is expected to increase the OPR in their next two meetings in November this year and January next year to at least 3% or higher. DHL may be the latest but will not be the last business organisation to increase prices for next year due to lack of confidence in Annuar’s ability to check rising costs. Ultimately Malaysians have to pay more for the government’s failure to rein in inflation.
Annuar has also dismissed the impact of the depreciating ringgit as temporary. Obviously, companies like DHL Express do not believe him when the ringgit has lost more than 11% of its value since 1 January 2022 to a new 24 year old low of RM4.65 recently, dropped to a historic low of RM3.26 against the Singapore dollar and weakened by more than 4% to the Indonesian rupiah this year.
Annuar is clearly ignorant of the adverse impact of the strong US dollar on our trade transactions and the fact that 80% of our exports and imports are invoiced in US dollars. The weak ringgit will further escalate our food import bill, which amounted to RM63 billion last year and negatively impact food prices paid by the rakyat.
Further, Malaysia’s services trade recorded the highest deficit ever of RM60.7 billion in 2021. The weak ringgit will definitely sharpen the services trade deficit this year. Will the government implement the structural economic reforms suggested by the World Bank that are deemed necessary to shore up the value of the depreciating Ringgit and to rein in inflation?