The ringgit dipped lower to RM 4.48 to the US dollar and is expected to hit the psychological barrier of RM 4.50 soon. Naturally, the weak ringgit will worsen domestic inflationary pressures by increasing the amount of foreign debt that Malaysia has to pay, cost of imported food, energy, goods and services, thereby further raising the cost of living for the rakyat.
However, it is not just against the US dollar that the ringgit has declined by year to-date(YTD) 7.5%. YTD the ringgit has declined against both the Singapore dollar by 4.2% and the Indonesian rupiah by 3.1%. The ringgit has remained almost unchanged YTD against the thai baht(+0.2%) and the Chinese yuan(-0.2%).
As these are our major trading partners, clearly investors see Malaysia as performing worse not just one-to-one against the United States but also against our neighbours such as Indonesia and Singapore. For the government to dismiss the decline in the value of our ringgit as cyclical due to rising interest rates in the United States, war in Ukraine or the COVID-19 lockdowns in China is like an ostrich in the sand choosing to cover up their inadequacies in good governance.
The government’s current pro-active monetary policy to arrest the decline in the value of the ringgit against other currencies is doomed to fail with poor-policy making and frequent policy U-turns in dealing with the rising cost of living and inflationary pressures, severe labour shortage and acute trust deficit in Ministerial competence. Unless these issues are addressed, the ringgit will continue to decline regardless of how proactive our monetary policy is.