January 23, 2018 / 6:03 AM / 2 years ago

UPDATE 1-Malaysia will "never" again peg ringgit against dollar - Najib

* Says govt has learned from 1MDB governance ‘lapses’

* Defends Malaysia infrastructure investments by China firms

* Says govt will focus on containing the fiscal deficit (Adds details, Najib’s comments on 1MDB and China)

KUALA LUMPUR, Jan 23 (Reuters) - Prime Minister Najib Razak, asking investors to take advantage of Malaysia’s economic recovery, on Tuesday said the government will never again peg the ringgit currency against the U.S. dollar.

At a gathering of business leaders and entrepreneurs, Najib also said his government has learned from “lapses of governance” at state investment fund 1Malaysia Development Berhad (1MDB), which has been the subject of probes in at least six countries.

In 1998, during the Asian financial crisis, then-Prime Minister Mahathir Mohamad, now Najib’s bitter political rival, pegged the ringgit against the dollar. The peg was maintained until 2005.

Najib said the pegging resulted in a loss of confidence among global investors.

“We have made it very clear that we would never repeat the measure (pegging ringgit to the dollar), trusting that while there may be short term fluctuations, in the longer term the level of the ringgit would reflect the strength of the Malaysian economy,” Najib told the conference in Kuala Lumpur.

The ringgit, which was battered in some recent years, strengthened more than 10 percent against the dollar in 2017. In July-September, the economy had annual growth of 6.2 percent, the fastest pace in more than three years.

Najib said the government will focus on lowering the fiscal deficit and keeping government debt in check.

It is “essential” to keep government debt below the self-imposed level of 55 percent of gross domestic product and to ensure that sovereign credit ratings “remain within the A band,” Najib said.


The prime minister dismissed claims by critics that his government has compromised on sovereignty by allowing huge investments by China’s state-owned firms into key infrastructure projects.

“FDI levels vary over time, and such connections are part of, and key to, a healthy and diversified economy,” he said.

Najib, who faced a leadership challenge following the 1MDB scandal, is preparing to call general elections that must be held by August.

“There were indeed failings at the company (1MDB), there were lapses of governance. There was valid cause for concern,” Najib said in a rare comments about the scandal.

The findings from investigations were “taken on board,” with 1MDB seeing a management change and review of operations, he said.

1MDB has been the subject of money-laundering investigations in countries including the United States, Switzerland and Singapore. In civil lawsuits, the U.S. Justice Department has alleged that about $4.5 billion was misappropriated from 1MDB.

The Malaysian fund has denied any wrongdoing and Najib, who founded 1MDB, has denied all allegations of corruption against him.

In December, U.S. Attorney-General Jeff Sessions described the 1MDB scandal as “kleptocracy at its worst”. (Reporting by Praveen Menon; Editing by Richard Borsuk)

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