KUALA LUMPUR (Oct 31): Raising the overnight policy rate (OPR) is not the only solution for addressing the depreciation of the ringgit, according to Prime Minister Datuk Seri Anwar Ibrahim.

Diverging from the approaches taken by countries such as Turkiye and Argentina that raised their benchmark interest rates to stabilise their devalued currencies, Anwar pointed out that Malaysia's economic indicators, such as inflation and unemployment rates, are still relatively low, while the economy and investments are steadily growing.

"I am not ready to recommend [memberi anjuran] an increase [in interest rates] solely due to the depreciation of the ringgit because our inflation rate remains low. I am concerned that this could impact small businesses, unless we are compelled to do so," Anwar stated in response to a supplementary question from Ahmad Fadhli Shaari (PN-Pasir Mas) during the parliamentary session in Dewan Rakyat on Tuesday.

Ahmad Fadhli has enquired whether there are more efficient methods than raising interest rates to address the recent depreciation of the ringgit which has now slipped to some 4.76 to the greenback to a near 25-year low.

Answering a separate supplementary question from Ku Abd Rahman Ku Ismail (PN-Kubang Pasu), Anwar who is also the finance minister, reiterated the government's medium and long-term plan to strengthen the ringgit, including increasing trade in the local currency or de-dollarisation.

"The depreciation of the ringgit is primarily due to higher interest rates in the US. So, the government's medium and long-term plan to strengthen the ringgit involves de-dollarisation," he explained.

Anwar said that the transition to using local currencies in trade has shown promising progress, with 25% of total trade with China conducted in ringgit and renminbi. Local currencies also accounted for 18% of total trade with Indonesia, and approximately 18% to 20% with Thailand.

"We have also had discussions with Arab countries about starting de-dollarisation as one of the long-term plans to strengthen the ringgit," he added.

The ringgit recently reached its lowest level in 25 years, prompting some economists to suggest that Bank Negara Malaysia raise its key interest rate — currently at 3% — to help stabilise the currency.

Bank Negara is scheduled to hold its sixth and final Monetary Policy Committee (MPC) meeting for 2023 on Nov 1 and 2.

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