KUALA LUMPUR: Putrajaya has no plans to peg the ringgit or impose exchange rate controls, similar to what was done during the Asian financial crisis, says Deputy Finance Minister Steven Sim.

“This is not the best solution for the challenges the country is facing currently,” Sim said during the oral question and answer session in the Dewan Rakyat on Wednesday (Nov 1).

“Firstly, the economy and the financial system are in a good position to face the fluctuations in the global financial markets and exchange rate.”

Sim said Malaysia will also lose the maneuvering space for monetary policy and will have to adjust the interest rates according to the currency the ringgit is pegged against.

“For example, if the ringgit is pegged against the US dollar, then we will have to increase our interest rates in tandem with the US and this will add cost pressure to the people,” he said.

He said to maintain the pegged currency, Malaysia will need huge international reserves.

“Otherwise, we will have to reintroduce capital controls to prevent speculative pressure on the ringgit.”

If capital controls are introduced now, it will dent investors’ confidence and lead to a high cost, which in turn may affect the capital flows, as the Malaysian capital markets are much bigger than what it was in 1998, he said.

Bank Negara Malaysia (BNM) will also ensure that measures are taken to cushion the volatility of the exchange rate.

He was responding to a question by Wan Ahmad Fayhsal Wan Ahmad Kamal (PN-Machang) on whether the government through BNM is planning to peg the ringgit to control the slide of the local note against the US dollar.

There have been debates on whether the local note should be pegged to control the exchange rate volatility.

As at 9.05am today, the ringgit eased to 4.7675/7720 against the greenback from Tuesday’s close of 4.7615/7655.