KUALA LUMPUR: Malaysia needs structural reforms to strengthen growth prospects and encourage more investment opportunities to boost the ringgit, economists said.
They also said that too much pressures have been put on Bank Negara Malaysia and that the goverment should play a more active role to stabilise the ringgit and strengthen the economy.
The Malaysian Inclusive Development and Advancement Institute of Universiti Kebangsaan Malaysia director Tan Sri Dr Noor Azlan Ghazali said since 2015, the ringgit has been categorised into two distinct bands.
Any fluctuations within the band are regarded as short-term phenomena.
Since 2005, the ringgit has been in two bands vis-a-vis rthe US dollar. The first band is between 3.0 and 3.8 and the second band between 3.8 and 4.6.
Noor Azlan warned that if economic reforms are not implemented, the ringgit is likely to enter the third range where its value is much weaker compared to the dollar.
"We are putting too much pressure on Bank Negara. It is a structural matter. If you look at Bank Negara's international reserves, are we crossing below US$100 billion very soon? he asked.
"Our retained import multiples and short-term external debt multiples are also not good. So I think we need to put less pressure on Bank Negara but more on Putrajaya," he said at UOBAM Mid-Year 2023 Outlook Forum here today.
Noor Azlan said for years, concerned voices have been calling for the government to take decisive action for a structural reform to support the economy.
"The question is when, what and who wants to do it? What is the goal? In the next few months, there will be four important documents which include economic narrative, civil industrial master plan, review on 12th Malaysian plan as well as 2023 Budget.
"This will be the initial stage for the country as an injection of confidence and it needs to be implemented this year," he said.
Echoing the views, UOB senior economist Julia Goh said looking at the foreign exchange (FX) spot rate alone will not help the ringgit because it is obviously moving alongside the renminbi and the dollar.
Therefore, Goh said Bank Negara has given the corporate businesses and individuals the tools to hedge, which help to take away some of the FX volatility risk.
"Malaysia has actually recorded net foreign portfolio inflows of about RM13 billion a year to date and our foreign direct investment swept record levels last year.
"So all these things haven't really changed. I think we cannot be too obsessed about the levels because in our view, in the next six months, the dollar strength will start to abate.
"Hopefully, with China's economic recovery, we could see the renminbi start to improve and that will also have a positive side in terms of its spillover to the ringgit," she added.