KUALA LUMPUR- Prime Minister Anwar Ibrahim said on Tuesday that Malaysia wants more trading partners to accept payment in ringgit, as part of a strategy to shore up the currency and reduce reliance on the U.S. dollar.
Anwar said Malaysia had agreements with Indonesia, Thailand and China, its largest trading partner, to encourage more trade and investment in local currencies.
“We want to increase the use of local currency in trading with China… or de-dollarisation. To stop the reliance on the US dollar is difficult, but Malaysia will be more active and aggressive in the use of ringgit,” Anwar told parliament.
Anwar was replying to questions from a lawmaker on what was being done about costs rising as a result of the ringgit’s decline against the U.S. dollar.
The ringgit is trading near historical lows and has lost about 7.5 percent of its value against the dollar this year.
Anwar said the ringgit’s decline was largely due to external developments such as rising US interest rates.
Malaysia would implement structural reforms that can attract investments and boost the economy, which would bolster the local currency, he added.
Anwar is due to present Malaysia’s budget for 2024 on Friday, with the government expected to cut subsidies for the wealthy and provide more support for low-income groups amidst a global slowdown and fiscal strains.
Malaysia’s economic growth hit the lowest in nearly two years in the second quarter due to sliding exports and a global slowdown, prompting the central bank to warn that full-year growth will come in at the lower end of its previous forecast.
The weaker outlook does not change most economists’ expectations for the central bank to keep policy rates on hold this year as the Southeast Asian economy confronts weakening global demand and a slowdown in main trading partner China.
Second-quarter annual growth came in at 2.9 percent, central bank data showed. The expansion was the slowest pace since the third quarter of 2021 when the economy contracted by 4.2 percent, and was lower than the 5.6 percent growth in the first quarter of the year.
Economists surveyed by Reuters had forecast gross domestic product growth at 3.3 percent in the April to June period.
Bank Negara Malaysia also said full-year economic expansion will come in at the lower end of the 4 percent to 5 percent range it had forecast earlier, though some economists predict the target will be hard to reach as domestic demand slows as well.
Malaysia, one of the world’s biggest exporters of palm oil and liquefied natural gas, could also take a hit on commodity production due to El Nino and prolonged plant maintenance.
