Numbers don’t lie


Goh Wei Liang, The Malaysia Insider

During a briefing session to economists and media reps in Putrajaya International Convention Centre on January 20 that was held after Prime Minister’s Special Address Budget 2015 2.0, a couple of words from Bank Negara Governor Tan Sri Zeti Aziz caught my attention.

I mean, she is the world’s best central banker. Every word that she says carries more weight than any other individual in Malaysia and we should pay attention.

In her reply to a few questions on Malaysian Ringgit’s performance against the US Dollar, Tan Sri said:

“Of course, when we built up our reserves, we were criticized for accumulation of too much reserves which were far in excess of those required by a country of our size… and this is what reserves are for, that is why we built up buffers.”

“…. the ringgit should strengthen to reflect our underlying fundamentals which remain solid and strong”

She is right. Just compare the two Press Releases by the Bank – one issued in 1999, another just a couple of weeks ago (summarized below)

Press Release dated October 22, 1999

  • as at 15 Oct 1999, international reserves amounted to RM113.9 billion or USD29.9 billion;
  • adequate to finance 6.2 months of retained imports.

Press Release dated January 8, 2015

  • as at 31 Dec 2014, the international reserves amunted to RM405.5 billion or USD116.0 billion;
  • sufficient to finance 8.4 months of retained imports

Countries must maintain a healthy level of reserves to protect themselves against shocks and external economic crises. Today, our reserves have grown almost 4 times since 1999 and can cover 8.4 months of retained imports which makes us almost as strong as India’s import cover.

I did a quick check on IMF’s spreadsheet on official reserve assets and other foreign currency assets. Out of all the reporting countries, based on the consolidated official and confirmed November 2014 statistics, Malaysia has

  • the 9th largest international reserves in Asia and;
  • the 18th largest international reserves in the world.