Govt must address weakening ringgit, living wage issues, says political analyst

Malaysia’s inflation rate may be the lowest in many years, but it does not reflect the reality as it is based on an outdated concept – the food basket.

That is the opinion of political analyst Dr Azeem Fazwan Ahmad Farouk, who said we should relook at the “minimum wage and think about a living wage”.

A popular indicator of inflation, the consumer price index tracks changes in the cost of a basket of goods and services over time.

“The situation has changed, and many things need to be revisited or relooked,” said Azeem, director for the Centre for Policy Research, Universiti Sains Malaysia.

“One of these is the minimum wage, which is different from a living wage. Things cost more now.

“We need to talk about inflation differently. More items need to be added to the ‘food and services basket’. For example, previously the internet was a luxury, but now, it is a necessity. So, the calculations are different.”

On the weak ringgit, Azeem said Prime Minister Datuk Seri Anwar Ibrahim needs to address the fall as he is also the finance minister.

Azeem said the opposition will surely turn it into a political issue, just as Anwar did before he took Putrajaya.

“The economy is a powerful tool, and the prime minister must take steps to address the weakening ringgit,” said Azeem.

“He has requested the opposition not to politicise the issue of the weak ringgit. But he did the same when he was not in government. So, I expect the opposition to use it as a ‘weapon’ against the government.”

Last Wednesday, the ringgit fell to its lowest since January 1998 when it was RM4.801 to US$1, close to the record low of RM4.885 from 26 years ago.

Bank Negara issued a statement last Tuesday, saying that the performance of the ringgit was “largely due to external factors”.

Anwar also said that the situation was different from 1998 because Malaysia recorded the largest-ever approved foreign investments last year, growing 23 per cent to RM329.5 billion.

Malaysia’s inflation rate remained constant at 1.5 per cent in December 2023 and January this year – among the lowest in the Southeast Asian region – while the unemployment rate decreased by 35 per cent.

Azeem admitted that times were different 26 years ago, and as such, Anwar needs to spell out his plan to strengthen the ringgit.

Former prime minister Tun Dr Mahathir Mohamad pegged the ringgit to the US dollar at a rate of US$3.8 per unit in September 1998 at the height of the Asian financial crisis, a move that lasted until 2005.

“Anwar said we can trade with our neighbours using the ringgit, but it does not change the fact that our currency is weak. The prices of goods will increase, as we eventually have to do business in the US currency,” said Azeem.

“The prime minister needs to tell us his strategies to arrest the fall of the ringgit and help regain confidence in it.

“Will he allow market forces to determine its value, or will he do something different? I hope to hear some good news soon,” Azeem added.

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