KUALA LUMPUR, Nov 23 — The RM1.39 billion in development expenditure (DE) financing in terms of loans were not borrowings made by the federal government to fund the entire DE for 2023, said the Ministry of Finance (MoF).

It said the RM1.39 billion were loans used to implement development projects, such as the RM23.9 million loan to Felcra and RM150 million loan to Agrobank in 2023.

"The state government and statutory bodies involved will repay the loans to the federal government,” the ministry said in a written answer posted on the Parliament’s website today.

The MoF was responding to a question from Onn Abu Bakar (PH-Batu Pahat), who asked if the reduction in borrowings from RM1.98 billion in 2022 to RM1.39 billion this year will jeopardise the development efforts for the people and country.

The ministry said the development efforts would not be affected as a large portion of the DE was provided as direct grants.

"Projects provided with loans, among them viable projects and borrowing entities that have the ability to repay the federal government such as water supply and treatment projects, will have financing based on project requirements,” it said.

The DE allocations prepared by the federal government each year, whether directly (grants) or loans, are to finance development projects for the people, including public infrastructure and facilities.

The ministry said, for 2023, RM99.0 billion was allocated for DE, including RM2.0 billion for contingency savings, compared with RM77.6 billion (including RM2.0 billion contingency savings) in 2022.

Meanwhile, it said the ringgit’s lowest exchange rate against the US dollar was in January 1998, during the Asian Financial Crisis, at the 4.8850 level, while the lowest since 2018 was on October 23, 2023, at 4.7943.

It was responding to a question from Lim Guan Eng (PH-Bagan) who requested the MoF to state the ringgit’s lowest historical exchange rate versus the US dollar and the lowest rate since 2018, as well as the steps taken to strengthen the local note to a stable level and reduce the negative effects from a weak currency.

"On November 9, the exchange rate was at 4.6930,” the ministry said, adding the current low exchange rate is largely driven by global developments, specifically the strong US dollar and China’s uncertain economic growth.

To strengthen the ringgit over the long term, the government maintained its commitment to focus on implementing structural policies that can increase economic growth and competitiveness in order to attract inflows of fund and foreign investments as well as improve the quality of direct domestic investments.

"These steps include transforming the country’s economy guided by the Madani Economy Framework through policies such as the National Energy Transition Roadmap, New Industrial Master Plan 2030, and the 12th Malaysia Plan Mid-Term Review,” it said.

The ministry said that apart from the recovery of global markets stability, the government’s measures, including the implementation of the New Investment Policy to improve the country’s investment climate and productivity, as well as the commitment to strengthen fiscal sustainability through the Public Finance and Fiscal Responsibility Act, are expected to improve investor sentiment and subsequently strengthen the ringgit.

"These moves together with the country’s political stability are expected to improve Malaysia’s long-term attractiveness to quality foreign direct investments that can contribute to the creation of highly-skilled and high-income jobs.

"Overall, these various efforts and measures are expected to improve sentiment and increase demand for the ringgit in the long term, which will be reflected in the strengthening of the ringgit’s value,” it said.

The MoF said that Bank Negara Malaysia (BNM), as the central bank responsible for the stability of the financial market and ringgit, will ensure that the ringgit’s adjustment will be in an orderly manner.

"To address the volatility of the foreign exchange market, BNM will continue to monitor domestic and external developments and use its operating policy instruments to ensure an orderly market,” it added. — Bernama