SHAH ALAM - Malaysia needs to take a drastic approach using the Ringgit pegging method (Fix-Currency) introduced by Tun Dr Mahathir Mohamad during the 1997 financial crisis.
The president of the Malaysian Economic Movement Armin Baniaz Pahamin said the administration led by Datuk Seri Anwar Ibrahim needs to drive the economy by introducing new and drastic policies to boost the country's economy out of the economic crisis.
He said new policies need to be introduced to develop local industries through exports in order to balance economic trade transactions.
"With the increase in the Overnight Policy Rate (OPR), the country takes on the risk of economic contraction, which could lead to turmoil.
"So we better prepare by rescheduling loan payments and cancelling credit cards to keep financial records for the future," he said in a statement on Thursday.
Armin Baniaz said that Malaysia also has no choice but to increase the OPR to strengthen the value of the currency, which stabilises the price of imported goods.
"The ringgit is depreciating more because it is in the market in the form of a lot of cash, including fiscal stimulus funds and RM145 billion from the Employees' Provident Fund (EPF) withdrawal during the pandemic.
He explained that this situation, coupled with the limited supply of goods, resulted in the price of goods becoming more expensive.
"The increase in OPR will reduce cash flow in the market and encourage savings. Even home loan rates, credit cards, overdrafts, and new car loans have become more expensive, which will curb spending.
"Despite Bank Negara Malaysia's (BNM) move to increase the OPR rate to restore the inflation rate and strengthen the value of the ringgit currency, it is not without impact on the people.
"That's why this move is not a populist move because last year alone, BNM raised the OPR rate four times," he said.
As one of the countries with the highest household debt in Asia, most people will be affected by the increase in the OPR rate, he said.
"Many individuals and households are expected and have even been affected by managing expenses involving food, utilities, and children's education.
"So now is the right time, and the government should raise the OPR rate when the people are in trouble and business has not yet recovered? He said Malaysia had no choice because it was strongly influenced by America's monetary policy.
"America has increased the OPR rate 10 times since March last year to five per cent, and this is affecting the world economy when developing countries' currencies flow back to America, making foreign currencies weaker," he stressed.