by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in Petaling Jaya on Wednesday, April 21,1993:
Mahathir’s statement is a confirmation that the RM RM9.3 billion to RM12.8 billion Bank Negara foreign exchange losses is not caused merely by the ringgit appreciation of international reserves but because of Bank Negara’s foreign exchange speculation
Yesterday, the Prime Minister, Datuk Seri Dr. Mahathir Mohamed, said that Bank Negara had dabbled in foreign exchange markets because of the country’s strong economy and large reserves. He said that although it was not the practice of central banks to trade in the international money market, Bank Negara had done so because of its capability.
This is a confirmation that the RM9.3 billion to RM12.8 Bank Negara foreign exchange losses is not caused merely by the ringgit appreciation of the international reserves but because of Bank Negara’s foreign exchange speculation activities.
The crucial and critical question is how much of the RM9.3 billion to RM12.8 billion losses were due to foreign exchange speculation by Bank Negara.
Dr. Mahathir said that no action would be taken against Bank Negara officials over the fall in the “Other Reserves” of the central bank in 1992.
He said: I don’t see why we need to take action. There were times in the past when we made profits. At that time we kept quiet, but now when there is a fall, we want to take action. This is not the way.”
What were the profits that the Bank Negara had made in the past from foreign exchange speculation because of its “ability and knowledge” – apart from the “paper profits” from the depreciation of the Malaysian ringgit vis-à-vis the foreign currencies?
The Finance Minister, Datuk Seri Anwar Ibrahim, should list in a White Paper to Parliament on the past profits which the Bank Negara has made from foreign exchange speculation since it started becoming an active player in the foreign exchange markets in the mid-1980s.
Bank Negara Governor, Tan Sri Jaffar Hussein, has said that he did not want to throw any light on “the size and details” of the Bank Negara’s foreign exchange losses as he did not want to “show his hand to the market”.
Malaysians are entitled to know how much of the RM9.3 billion to RM12.8 billion losses stem from Bank Negara having its fingers burnt because of foreign exchange speculation
He said if he is to provide a satisfactory answer, he would need to release certain details on the bank’s foreign exchange transactions, the composition of its reserves, aspect of its intervention operations, the strategy for reserve management and its forward commitments in the various currencies. He said such revelations would affect the “future effectiveness” of Bank Negara in reserves management.
The country and people are not asking Bank Negara to give public details of “the composition of its reserves, aspect of its intervention operations, the strategy for reserve management and its forward commitments in the various currencies”, but they are surely entitled to know global figures as to how mu of the Rm9.3 billion to Rm12.8 billion losses derive from Bank Negara having its fingers burnt because of its foreign exchange speculations!
Economists and money market analysts had expected Bank Negara to report a drain of few billion ringgit in its international reserves because of the appreciation of the ringgit and Bank Negara’s right against inflation in mopping up excess liquidity from the heavy inflow of foreign funds.
What has come as a shock is that the charge against reserves could be as high as RM9.3 billion to RM12.8 billion, when economists and money market analysts expected a Rm3 billion to Rm4 billion charge, based largely both on the funds used to reduce excess liquidity and the appreciation of the ringgit against the foreign exchange held and accumulated by Bank Negara during this year.
As the Bank Negara Governor, Tan Sri Jaffar Hussein, has refused to explain how much of the R9.3 billion to RM12.8 billion Bank Negara losses was caused by foreign exchange speculation, the Finance Minister, Anwar Ibrahim, should report this figure to the country and people.