Governor of Bank Negara said that the decline in foreign reserves for Oct and Dec 08 is mainly due to a reversal of short-term capital flows. The forex exchange between US$ and RM decline to US$1.00=RM3.60 now.
Accodring to source from Ganesh (http://sahathevan.blogspot.com/),
1. Between 15 May 2008 and 31 October 2008, Bank Negara’s total assets in Malaysian Ringgit terms fell 26% from RM 506,986,188,441 to RM 374,372,661,598.
2. Reserves of foreign exchange and gold alone fell 13.6% , from RM 399 919 106 509 to RM 345 549 644 622. This equated in US dollar terms to a fall of 20%, from USD 125.1 billion to USD 100.2 billion.
3. Bank Negara appears to have financed this fall by simply printing more Ringgit.
Over the same period from 15 May 2008 to 31 October 2008 currency in circulation has increased 9.3%, from RM 42 614 989 793 to RM 46 595 122 319.
4.However this might not be the whole story.Federal Govt deposits have increased 130%, from RM 9,434,186,821 to RM 21,622,286,904. This increase raises the question of where the deposits came from. It is possible that these may well be “new” Federal Government funds, recently minted and issued by Bank Negara.
Conclusion:
All this would mean a further decline in the value of the Ringgit,and higher inflation as more money circulates in the economy.
No comments:
Post a Comment