Bank Negara Malaysia deputy governor Datuk Marzunisham Omar stressed on the urgency for the country to undertake structural reforms to address the weakening of the local currency. (Photo by Suhaimi Yusuf/The Edge)

KUALA LUMPUR (March 25): Bank Negara Malaysia deputy governor Datuk Marzunisham Omar attributed the secular decline in the ringgit to the nation’s competitiveness and productivity.

Marzunisham stressed on the urgency for the country to undertake structural reforms to address the weakening of the local currency. The ringgit was at 4.7238 to the US dollar on Monday compared with 4.069 five years ago and 3.299 ten years back.

“In the longer term, yes, I think like any other exchange rate, [the] ringgit is a price of the currency against [or] relative to another country.

“This is where in terms of competitiveness, productivity, I think, as well as our potential growth, these are some of the key indicators that over a long time would actually determine the fair value of the ringgit,” he told the audience here at a panel discussion by the Malaysian Economic Association.

“That is why we continue to stress the importance of us undertaking certain reforms. Over time, it has to be fundamentally driven, by fundamental factors and relative to other countries,” he explained when asked about the cause of the secular decline in the ringgit.

Marzunisham pointed out Malaysia has a window of opportunity now to implement the necessary structural reforms amid positive growth trajectory and moderate inflation this year.

“I think all of us can agree that undertaking structural reforms is key in ensuring a more sustainable growth for the country. We are fully cognizant that reforms are difficult and often involve short-term costs,” he said.

Therefore, Marzunisham said these reforms must be strategically sequenced and supplemented by targeted assistance to minimise the burden on households and businesses.

Marzunisham said the country should focus on expediting the implementation of various master plans proposed by the government, like the New Industrial Master Plan 2030 and the National Energy Transition Roadmap.

“We must also develop a future-ready workforce through labour market reforms. Another area of reform is to strengthen our social protection programmes, especially facing the ageing society, ageing demographic that is coming.

“We must remain steadfast in our commitment in undertaking fiscal reforms. The passing of the Fiscal Responsibility Act (FRA) last year was a major milestone.

“In the FRA, four fiscal goals were put in place and the government is committed over the medium term to achieve the fiscal goals, including bringing down our government debt to 60% [of GDP] and the government deficit to 3% [of GDP],” he said.

Although there are short-term adjustment costs, Marzunisham said these reforms will raise Malaysia’s competitiveness and expand the country’s productive capacity and therefore ensure more sustainable growth and improve the people’s standard of living in a sustainable manner.

“All these will help to provide an enduring support to the ringgit,” he said.