PUTRAJAYA: There is no need to peg the ringgit at the moment although the country will study this as an option if needed, Malaysian Prime Minister Mahathir Mohamad told Channel NewsAsia on Monday (Jun 25), adding that his government is also mulling going cashless or changing currencies in a bid to combat corruption.
"We are studying how best to reduce corruption, certainly, and how best to keep track of money that is being spent, especially by the government," he said in the interview with Conversation With.
"At the moment, there is no need (to peg the ringgit). But we will have to study that also. That is one of the options that we have."
The ringgit was trading at 4.0100/0130 against the greenback on Monday morning.
At the height of the Asian Financial Crisis in 1998, Mahathir famously pegged the currency to the US dollar - a controversial move at the time that went on to be credited for helping to stabilise the economy.
Now back as prime minister again, Mahathir and his new government have been accused of spooking investors with revelations of financial scandals as well as debt and liabilities of more than US$251 billion, or 80.3 per cent of the country’s GDP. Finance Minister Lim Guan Eng has defended exposing this, telling Channel NewsAsia that in the long term, transparency would make Malaysia more attractive to investors.
Corruption is one of the biggest legacies of the old administration, according to the prime minister, and changing currencies could be one way Malaysia deals with this.
"It's not an easy thing because when you want to replace currency, you must know how much currency is in circulation … because we have to replace what is in circulation and that is a very big amount," he said.
"If you were to replace, you need to print huge amounts of paper money ... but that is not a decision that one makes lightly. You have to study the effect on the economy."
The prime minister says his government does not have fixed a timeline to make a decision on this but it will implement what is best for Malaysia "as we study".
The ringgit comes in denominations of RM1, RM5, RM10, RM20 and RM100.
REDUCING DEBT TO RM300 BILLION
Meanwhile, Mahathir said his government would like to reduce the nation's debt "to the amount that was incurred by, maybe, (the amount it was) before I stepped down - about RM300 billion (US$74.76 billion)."
"That will be much less than the GDP per year," he said.
"But we know that we have more than RM1 trillion (in debt and liabilities) so we have to reduce it to maybe RM500 billion or so ... but we don’t know yet."
The former finance minister said he hoped to have made some headway in reducing the debt within a year.
"We have to pay of course not only interest but principle payments ... We are thinking that if we can source some cheap money, we use that money to retire some of the high cost borrowings so that we still have the money, we still have the loans, but it costs us much less," he said.
So far, Mahathir said his government had already reduced the nation's debt by some RM200 billion after cutting down on borrowings.
"Those borrowings which are not yet off the ground, we stop. For example, the (Kuala Lumpur-Singapore) High Speed Rail," he said of the cost-cutting measures.
"We don’t really need the high speed rail, we can postpone it to some other time, because we don’t have the money. That reduces the amount of borrowings that we have.
"And then we have the (China-backed) East Coast railway ... we find that the agreement is such that we cannot just drop it so we may have to continue with it.
"And if we continue with it, we have to reduce the cost of this railway."
The size of the government too will be smaller compared to the last in a bid to save costs. Mahathir told Channel NewsAsia his Cabinet will have around 29 people, compared to the more than 40 in Najib's.
"We don’t spend money on trying to be popular," he said.
"For example, the previous government gave money to all kinds of people in order to buy their support. Of course, they failed.
"This government will be a much leaner government so money will be spent only when needed."
To watch the full interview, tune in to Conversation With on Thursday (Jun 28) at 9.30pm (SIN/HK).