- The Washington Times - Thursday, January 20, 2005

KUALA LUMPUR, Malaysia — Prime Minister Abdullah Ahmad Badawi and the central bank said yesterday that the country’s currency peg to the U.S. dollar would not be reviewed at this stage.

Their comments were a rebuff to former Prime Minister Mahathir Mohamad, who imposed the peg but now says it is time for a change. Mr. Mahathir, who retired in October 2003 after 22 years in power, said the peg of 3.80 ringgit to the dollar was not “cast in stone,” but that it would remain for the time being.

“There is no change at this point,” said Mr. Abdullah, who is also finance minister.

“If there comes a time when changes are required to be made for the benefit of the people, we would consider making the changes then,” he said when asked by the official Bernama news agency to respond to Mr. Mahathir’s comment.

Asked whether the government has a specific time frame to change the peg, Mr. Abdullah said: “There is no time frame, but like I said before … no regulation is cast in stone.”

The ministry will analyze the situation regularly, he added.

Zeti Akhtar Aziz, governor of Bank Negara, Malaysia’s central bank, told reporters later that the government would take a fresh look at the peg only if the currency became fundamentally misaligned or if there was a major structural change in international or regional financial systems.

“Currencies change from time to time. We already said we don’t look at just one currency. We look at many currencies. We want stability in our exchange rate against our major trading partners,” Mrs. Zeti said in response to Mr. Mahathir’s remarks.

“We said at the very outset that we will look at developments, and if there are fundamental structural changes — or if there are potential misalignments of our currency, we will review the situation,” she said.

Mr. Mahathir, who pegged the ringgit to the U.S. dollar and imposed capital controls in 1998 amid the Asian financial crisis, said Wednesday that it was time to review the currency peg.

The weak dollar had caused the ringgit to depreciate against major currencies, Mr. Mahathir said.

“I feel the time has come for us to review because we have lost a lot as the value of our currency has fallen.”

Mr. Mahathir, who also is a former finance minister, had defied International Monetary Fund (IMF) prescriptions by pegging the currency.

However, the IMF since has acknowledged that his actions enabled the country to weather the Asian crisis better than many of its neighbors.

Mr. Mahathir has joined a growing chorus of calls for a review of the peg. He said the sharp decline in the value of the dollar meant that it was now costlier to import products from Japan, Europe and elsewhere.

Pressure for change has led to an inflow of funds from overseas speculators hoping to take advantage of any upward shift in the ringgit’s value.

Speculation that China might adjust its own currency peg to the dollar and allow the yuan to rise has lent strength to the belief that Malaysia may follow suit. Its economy has recovered strongly, and exports are at a record high.

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