Mahathir says he had no legal power to interfere in central bank's affairs when he was PM

Former Malaysian Prime Minister Mahathir Mohamad testified on Monday, Sept 18, 2017 to a Royal Commission of Inquiry (RCI) probing Bank Negara Malaysia's forex losses in the 1990s.
Former Malaysian Prime Minister Mahathir Mohamad testified on Monday, Sept 18, 2017 to a Royal Commission of Inquiry (RCI) probing Bank Negara Malaysia's forex losses in the 1990s. PHOTO: EPA

PUTRAJAYA - Former premier Mahathir Mohamad said on Monday (Sept 18) that he had no legal authority to interfere in the policies and affairs of Malaysia's central bank when he was in power, as he testified before an inquiry into Bank Negara Malaysia's foreign exchange losses in the 1990s.

Tun Mahathir said Bank Negara Malaysia (BNM) had operated independently as a body created under the Central Bank of Malaysia Ordinance and had its own structure headed by its governor.

"As prime minister, I was never involved in Bank Negara's administration and I believe that I was not permitted under the law to get involved in its policies and affairs," he said in a prepared statement to the Royal Commission of Inquiry (RCI). 

Dr Mahathir, however, said this did not mean that the governor never talked about BNM.

"But all discussions were just normal ones without details in relation to Bank Negara's specific activities," he told the RCI.

He also said he was only apprised of the bank's forex losses in 1993, after it first reported such amounts in its annual financial report.

But Dr Mahathir, who now chairs the opposition Pakatan Harapan coalition, said the losses only amounted to RM5.7 billion (S$1.8 billion), and not the RM30 billion or US$10 billion cited by other witnesses.  

The RCI was formed on July 1 to uncover facts behind massive losses notched up by the central bank in its aggressive forex trading more than two decades ago. Critics say it is a government move to smear Dr Mahathir, and Anwar Ibrahim, the jailed opposition icon who was Finance Minister in the 1990s.

Before Dr Mahathir's statement on Monday, Anwar's predecessor Daim Zainuddin said he was never informed by Bank Negara about engaging in currency trading beyond protecting national reserves and the ringgit.

"If I knew all these things, I would've stopped it. No way I would have let it go on. I would hang (the person responsible)," said Tun Daim, who was Finance Minister from 1984 to 1991 and is known to be a close confidante to Dr Mahathir.

BNM, between 1988 and 1994, took up huge positions in the international forex market that led to the losses. The commission determined in its first sitting that the total loss was RM31.5 billion. Prior to the RCI's formation, the total sum reported by BNM on forex losses between 1991 and 1993 was RM9.3 billion.

Shannont@sph.com.sg