As the ringgit falls to a 26-year low, Malaysian businesses prepared for expensive consequences

The low value of the Malaysian ringgit is a heavy price for enterprises operating there, increasing the cost of international debt servicing and material imports. S&P Global Ratings says that companies that rely heavily on raw materials, including airlines, are more vulnerable as the ringgit has fallen to a 26-year low. Malaysian Prime Minister Anwar Ibrahim stated on February 23 that the ringgit has dropped to its lowest point since the Asian financial crisis in the late 1990s and that the central bank has been tasked by the government with keeping a careful eye on the currency.

 

On February 27, Malaysia’s central bank declared that the country’s strong economic fundamentals and future prospects warrant a higher price for the ringgit, which it currently trades at.In order to promote ongoing inflows into the foreign exchange market, the central bank has increased its interactions with corporations, investors, and government-linked enterprises, according to a statement released by Bank Negara Malaysia governor Abdul Rasheed Ghaffour. The ringgit should be traded higher given Malaysia’s strong economic fundamentals and prospects, he said.

 

By 1.04 pm on February 27, it had slightly risen to 4.779 against the dollar, while it was trading at 3.5552 against the Singapore dollar. The SME Association of Malaysia’s national secretary-general, Mr. Chin Chee Seong, stated, “We have already been feeling the impact as the ringgit has been falling.” It’s going to get even worse now. We in the service industry who import goods and materials will suffer much greater losses.The weak ringgit may put further pressure on discount airline AirAsia and Malaysia Airlines, who are still getting over their debt restructure from 2021. Mr. Xavier Jean, senior director for corporate ratings at S&P in Singapore, stated that the airline industry is the most vulnerable to hazards because of currency mismatch in operations.

Be the first to comment

Leave a Reply

Your email address will not be published.


*