KUALA LUMPUR • Prime Minister Najib Razak, asking investors to take advantage of Malaysia's economic recovery, yesterday said the government will never again peg the ringgit against the US dollar.
At a gathering of business leaders and entrepreneurs, Datuk Seri Najib also said his government has learnt from "lapses of governance" at state investment fund 1Malaysia Development Berhad (1MDB), which has been the subject of probes in at least six countries.
In 1998, during the Asian financial crisis, then Prime Minister Mahathir Mohamad, now Mr Najib's bitter political rival, pegged the ringgit against the dollar. The peg was maintained until 2005.
Mr Najib said the pegging resulted in a loss of confidence among global investors.
"We have made it very clear that we would never repeat the measure, trusting that while there may be short-term fluctuations, in the longer term the level of the ringgit would reflect the strength of the Malaysian economy," he said.
The ringgit, which had been battered in some recent years, strengthened more than 10 per cent against the dollar last year. In the July-September period, the economy posted annual growth of 6.2 per cent, the fastest pace in more than three years.
Mr Najib said the government will focus on lowering the fiscal deficit and keeping government debt in check. It is "essential" to keep government debt below the self-imposed level of 55 per cent of gross domestic product and to ensure sovereign credit ratings "remain within the A band", he added.
He dismissed claims by critics that his government had compromised on sovereignty by allowing huge investments by China's state-owned firms in key infrastructure projects. "FDI (foreign direct investment) levels vary over time, and such connections are part of, and key to, a healthy and diversified economy," he said.
Mr Najib, who faced a leadership challenge following the 1MDB scandal, is preparing to call general elections that must be held by August.
"There were indeed failings at (1MDB), there were lapses of governance. There was valid cause for concern," he said in a rare comment about the scandal.
The findings from investigations were "taken on board", with 1MDB seeing a management change and review of operations, he added.
1MDB has been the subject of money-laundering investigations in countries including the US, Switzerland and Singapore. In civil lawsuits, the US Justice Department has alleged that about US$4.5 billion (S$5.9 billion) was misappropriated from 1MDB.
The Malaysian fund has denied any wrongdoing and Mr Najib, who founded 1MDB, has denied all allegations of corruption against him.