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Excessive Speculation Causes RM31.5 Bln Forex Losses In The 90's
Last update: 26/12/2017
KUALA LUMPUR, Dec 26 (Bernama) -- Excessive speculative activities had caused Bank Negara Malaysia (BNM) to suffer foreign exchange transaction losses amounted to RM31.5 billion in the 90's, said Second Finance Minister Datuk Seri Johari Abdul Ghani.
Citing an internal audit report prepared by BNM's internal auditors dated Jan 21, 1994, he said the monthly maturing buy and sell foreign exchange transactions which amounted to an average of RM140 billion in 1992 increased to a staggering RM750 billion in 1993.
"AÂ substantial portion of such transactions was very speculative in nature and did not reflect BNM's mandate to maintain orderly condition of the foreign exchange market as per Section 4Â of the Central Bank of Malaysia Ordinance 1958," he said in an open letter to former prime minister Tun Mahathir Mohamad, today.
Johari said the audit report also highlighted that the magnitude of such foreign exchange speculative transactions was considered very excessive, given that BNM's shareholders' fund was only at RM4.4 billion and the country's international reserves were merely at RM43.98 billion at the material time.
The audit report also stated that the voluminous speculative foreign exchange trading activities that the central bank had undertaken during that time were carried out by the Foreign Exchange Division of the Banking Department of BNM, headed by its then advisor/manager Tan Sri Nor Mohamed Yakcop, who later became second finance minister.
Johari said because of the scale of the foreign exchange speculative activities losses, the government was forced to transfer its shares in Telekom and Tenaga Nasional Bhd (TNB) to BNM at the nominal value of RM1 per share, and these shares were immediately revalued by BNM at RM22.10 and RM19.30 per share for Telekom and TNB, respectively.
Additionally, BNM had to dispose of its Malaysia Airlines shares to a third party at the price of RM8 per share and MISC shares at RM10 per share to the Retirement Fund Incorporated in order to realise the gain.
"If the speculative foreign exchange losses were not real, the government would not have taken these drastic actions in order to cover BNM's losses at that material time," he said.
The minister said it was very important for the public at large to understand the difference between speculative foreign exchange activities and orderly management of foreign exchange market.
"The speculative foreign exchange activity, to put it in simpler words, is a kind of 'gambling' activity in the hope for quick returns.
"The orderly management of the foreign exchange market, however, is very different, in that it is a facilitation of liquidity by BNM for the purpose of mitigating imbalances with respect to the ringgit's supply and demand in the market," he said.
Johari added that BNM and the country had since come a long way, particularly in instituting necessary reforms and check and balance with regard to its foreign exchange forward transaction activities.
As a result of these reforms, Malaysia's economy remained resilient and BNM's ability to safeguard financial and economic stability remained uncompromised, despite the recent volatility in capital flows and the ringgit.
Johari said Malaysia's international reserves had continued to strengthen ever since, and as at end of November 2017, the reserves amounted to US$101.9 billion and able to support 7.5 months of retained imports.
"I have said enough on this subject and if understanding of the truth is not the objective of the discussion, then there is nothing much I can say on this," he said, adding he did not want to prolong the discussion on the issue, especially since there was already an independent team at the Royal Malaysian Police investigating the matter.
-- BERNAMA
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Source: Bank Negara Malaysia |
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