(Petaling Jaya, Tuesday): The Prime Minister, Datuk Seri Dr. Mahathir Mohamad said in Chicago yesterday that the ban on trading of the ringgit will only be lifted if the International Monetary Fund (IMF) stops the people from trading currency.
He said that a fixed exchange rate does not harm anybody unlike currency trading when "they devalue your currency you will become poor."
The Prime Minister said that Malaysia had informed the World Bank and IMF that the international financial architecture needed to be amended so that currency trading could be stopped.
Mahathirís statement in Chicago raises two fundamental questions:
The analysts polled are of the view that the market is drifting purely because of capital controls and that a lot of investors are just waiting to come in.
Mahathirís uncompromising statement in Chicago has come as a surprise as Zainal Aznam Yusof of the National Economic Action Council had hinted that a revision to the 10 per cent tax on repatriated stock market profits was under consideration.
Zainal said the government "might look at it again, because the feedback is still that 10 per cent is a big hindrance in moving capital in and out''. Last week, he was again quoted as saying that the exit tax may be halved to 5 per cent as early as next month, when the government announces its annual Budget.
The question Malaysians want to ask is whether Mahathir is prepared
to preserve the present capital controls intact so long as IMF does not
or cannot ban currency trading - regardless of the economic cost to Malaysia.