By Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in Petaling Jaya on Tuesday, April 20, 1993:
18 million Malaysians cannot accept the Bank Negara Governor’s explanation that the RM 9.3 to RM 12.8 billion foreign exchange losses are mere ‘paper losses’
DAP welcomes the lengthy nine-page statement yesterday given by Bank Negara Governor, Tan Sri Jaffar Hussein in response to public demands for a full explanation of its 1992 Bank Negara Report which indicated that the Bank Negara had suffered RM 9.3 billion to RM 12.8 billion losses from its foreign exchange dealings.
This explanation should have been given by the Bank Negara on the day it released its 1992 Annual Report on March 30, and not forced out of it three weeks later.
It has also been reported that the Finance Minister, Datuk Seri Anwar Ibrahim, yesterday confirmed that he had received the explanations of the Bank Negara Governor. This does not reflect well either on the Finance Minister or the Bank Negara Governor, as the Finance Minister should have been fully briefed on the matter early this year when the Bank Negara would have known of its international reserves position when compiling the 1992 Annual Report.
From the tone of the explanation of the Bank Negara Governor, he seems to want the 18 million Malaysians to feel very proud of the record of the Bank Negara in incurring ‘paper losses’ in foreign exchange from RM 9.3 billion to RM 12.8 billion.
The nine-page lengthy explanation by the Bank Negara Governor yesterday would require more detailed study, but my preliminary reactions are as follow:
* The 18 million Malaysians cannot accept the Bank Negara Governor’s explanation that the RM9.3 billion to RM 12.8 billion foreign exchange losses are mere ‘paper losses’.
Tan Sri Jaffar Hussein said that “the real value of the foreign exchange assets has not changed, i.e. no losses; only their prospective purchasing power has fallen – a paper loss”.
This ‘loss in prospective purchasing power’ would be realized, however, if there is any disposal of the international reserves.
* Tan Sri Jaffar said that “the bank’s loss is the nation’s gain”.
This is his reasoning: Bank Negara’s external reserves at the end of January 1993 amounted to about RM 49 billion. The country’s external debts (of the government, its agencies and the private sector) amounted to about RM 41 billion.
A 10 per cent appreciation of the ringgit will result in a RM 4.9 billion loss in its external reserves even if the bank does nothing. However, such a 10 percent appreciation of the ringgit will mean that this stock of external debt in ringgit terms will be 10 per cent less.
If Tan Sri Jaffar claims that the ‘foreign exchange’ loss of the Bank Negara is ‘a paper loss’, then by the same logic, is the gain in the country’s external debts as a result of the appreciation of the ringgit ‘a paper gain’?
If these are neither ‘paper gains’ nor ‘ paper losses’, then the country stands to suffer net loss as the country’s international reserves of RM 49 exceeds the external debts which is RM 41 billion.
*The Bank Negara Governor’s statement did not give the “size and details of the loss” on the ground that he would have to “show my hand to the market”. This raises the question whether the Bank Negara is accountable to no one in its operation – not even to Parliament. If not, a mechanism must be established whereby Bank Negara should be required to provide accountability to a special Parliamentary Committee which could hold its meetings in camera so that Bank Negara Governor will not have to “show his hand to the market” and yet comply with the principle of accountability and responsibility to Parliament.
* The Bank Negara Governor’s statement did not answer the question whether Bank Negara had been involved in foreign currency speculation and whether this had been an important cause of the foreign exchange losses it had suffered.