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IMF staff, directors divided over ringgit value


WASHINGTON: The International Monetary Fund said yesterday that a staff report found Malaysia’s currency to be undervalued, but many of the fund’s directors disagreed with the assessment.

In a statement following its regular consultation with Malaysia, the IMF said directors thought Malaysia’s monetary policy and exchange rate were “broadly appropriate.”

The IMF said Malaysia’s economy would probably be mired in a recession through 2009, with quarterly economic growth resuming early in 2010.

The export sector has been particularly hard hit, and that is part of the reason behind the difference in opinion between the IMF staff and directors over the value of the ringgit currency.

A weaker currency would support exports, but a stronger one would encourage the country to rebalance its economy toward more domestic demand.

IMF staff said the ringgit appeared to be “weaker than its equilibrium level in real effective terms.”

“However, many directors were unconvinced by the exchange rate assessment, and underlined the uncertainty about fundamentals and transitory factors related to Malaysia’s commodity exports and the global crisis,” the IMF said.

The Fund added that “some” directors supported the staff’s position that once recovery is firmly established, a faster appreciation of the ringgit would help rebalance the economy. -- Reuters