AS Promised, Prime Minister Datuk Seri Dr Mahathir Mohamad Did Shock Malaysians And Foreigners By

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AS promised, Prime Minister Datuk Seri Dr Mahathir Mohamad did shock Malaysians and foreigners by
announcing sweeping controls on the ringgit.

Currency controls include a ruling that makes the ringgit non-legal tender abroad, restrictions on the amount
of cash in ringgit and foreign currencies that travellers can carry, new regulations on the purchase and sale of
stocks in the local bourse, and making it compulsory for exporters to turn in their export earnings which will
be denominated from now on only in foreign currencies.

All these are no doubt shocking but by no means surprising for those who have been reading the lips.

Apparently, Dr Mahathir by a single stroke of genius has delivered a serious blow to the currency speculators
by bringing an immediate end to ringgit trading in the international market.

The ringgit will be no more than a piece of paper outside the country after Oct. 1. This is a strategic manoeuvre
to insulate the economy from the adverse effects of currency turmoil that threatens to take on global
proportions. All this means that there will be currency exchange for economic transactions but no currency
trading.

It may well be argued that tough times warrant tough measures, even if they flout economic orthodoxy. This is
time for lateral, not linear thinking. As the saying goes "when the going gets tough, the tough gets going". Be
that as it may, there are pros and cons to almost everything. Nothing is costless.

The downside represents the price one must pay for the upside. It is important to count the costs and benefits
before one can conclude if it is really worth the price one pays.

There are many positive things one can say about ringgit controls. First of all, it will protect the economy from
the adverse external influences emanating from the forex market by stabilising the ringgit. Second, it will force
ringgit parked abroad to be brought home before the end of September. Third, it will ease liquidity shortage in
the banking system and keep interest rates low. Fourth, it will defuse inflationary pressures by keeping
imported inflation at bay.

Fifth, it can make more domestic resources available for implementing the National Economic Recovery Plan,
especially Danaharta and Danamodal which have been established to buy non-performing bank loans and to
recapitalise the banking system, respectively.

Sixth, it can rev up the economy by removing the credit crunch that has had a debilitating effect.

Finally, it is lik

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