Finance Minister II, Datuk Seri Amir Hamzah Azizan said Malaysia's setting of a lower Overnight Policy Rate (OPR) compared to the Philippines, Indonesia, Korea and India was the main cause of the fall in the ringgit.
While Malaysia's OPR remained at 3% after it was raised by 125 basis points, the four countries raised their key policy rates by 200 to 450 basis points. It is much higher than Malaysia.
The significant difference in interest rates with the United States, which is as much as 250 basis points, prompts foreign investors to shift their capital out of the domestic market to markets that provide higher returns.
The main goal of Bank Negara's monetary policy committee in determining the OPR is to stabilize prices and ensure sustainable economic growth rather than to control the ringgit exchange rate.
He added that if the OPR is increased to strengthen the ringgit, the national economy will be affected and various parties, especially borrowers, will have to pay higher interest.
For now, the government is taking steps to protect its fiscal policy where the national fiscal deficit to gross domestic product ratio has been lowered to 5% from 5.6% in 2022.
This year, the government is projecting a further drop to 4.3% and will work with government-related companies as well as government-related investment companies.
This action will give them the opportunity to earn more profits through investment abroad.
When investments abroad get more profit to bring back home, within a week and a half, we can see the value of the ringgit getting stronger.
