In its 2024 annual report, Bank Negara Malaysia (BNM) reaffirmed the credibility of a flexible exchange rate as a prudent tool for managing short-term risks to the ringgit, while emphasizing that lasting stability hinges on strengthening the economy itself. The central bank argued that the adopted regime allows Malaysia to respond to evolving external conditions, cushioning the economy from sudden shifts while preserving room for growth over time.
The Case for a Flexible Exchange Rate in 2024: Balancing Short-Term Risks with Long-Term Goals
BNM’s defense of the flexible exchange rate regime rests on its ability to accommodate fluctuations in the global environment without compromising the domestic price and financial stability framework. The ringgit’s movements, including a 26-year low against the U.S. dollar in the prior year, prompted critics to question whether the regime had failed. The central bank’s response was to underscore the regime’s intent: to permit the currency to absorb external shocks, thereby preserving the smooth functioning of the economy’s real and financial sectors. A weaker ringgit, when managed properly, has the potential to improve the competitiveness of Malaysia’s exports, stimulate demand for domestic goods, and invigorate the tourism sector. This combination can, in turn, support output and employment, especially during periods of global disruption.
A key part of the argument is the economy’s underlying strength. Malaysia’s diversified economic structure, a robust financial system, and a solid external position with persistent current account surpluses and ample foreign exchange reserves collectively enhance resilience against external shocks. This resilience is a cornerstone of why a flexible regime can be beneficial. By allowing the exchange rate to adjust in response to external conditions, BNM aims to maintain macroeconomic balance and cushion the domestic economy from abrupt external changes while the fundamentals are reinforced through prudent policy.
In their assessment, BNM highlighted that the ringgit depreciation in 2024 was addressed through targeted actions designed to manage volatility rather than disrupt the broad economic trajectory. The central bank emphasized that its measures focused on ensuring liquidity in the foreign exchange market and avoiding excessive disruption to broader macroeconomic fundamentals. This involved selective use of international reserves to counter disorderly market conditions, a strategy intended to prevent panic and volatility from spilling over into the real economy. In other words, the central bank sought to dampen episodic swings while maintaining a steady course for growth and stability.
A central feature of the strategy was recognizing that intervention is a careful balancing act. The decision to intervene—when, how much, and for how long—requires a measured and prudent approach. BNM stressed that the objective is not to sterilize every fluctuation, but to prevent disorderly movements that could undermine confidence in the financial system or impede the transmission of monetary policy. The emphasis on a robust financial system as the backbone of resilience reflects the understanding that exchange rate movements, though a natural part of a dynamic economy, must not erode the integrity of credit, liquidity, or confidence.
Beyond stabilization, BNM highlighted efforts to deepen the local foreign exchange market. A prominent initiative in this regard is the Qualified Resident Investor (QRI) program, introduced in April 2024, designed to facilitate the repatriation of foreign currency proceeds from overseas investments into the ringgit. This program aims to promote a more balanced flow of funds and to bolster demand for the local currency, thereby contributing to a more resilient market structure. By linking overseas investment activity with domestic liquidity and currency demand, the QRI program is intended to support the ringgit’s efficiency and stability over time.
The case for the regime also rests on the premise that structural factors—rather than short-term monetary interventions—ought to underpin durable stability. While FX interventions can moderate transitory volatility, relying excessively on reserves to counter longer-term, fundamental drivers of currency movement is not viewed as the optimal path. Instead, BNM argues for a shift in emphasis toward structural reforms and policy measures that strengthen the economy’s productive capacity. This includes expanding financial market development to improve resilience against the adverse effects of ringgit volatility, as well as pursuing policies that bolster productivity and competitiveness, with the ultimate aim of improving long-run growth prospects and fiscal sustainability.
In that context, BNM signals that the government’s ongoing policy agenda, including major development plans, will play a pivotal role. The New Industrial Master Plan 2030 (NIMP) and the National Energy Transition Roadmap (NETR) are highlighted as strategic frameworks with the potential to raise the country’s productive capacity and integration into higher-value global supply chains. The shared objective is to shift Malaysia up the value chain—toward higher-quality, more sophisticated, and diverse products—rather than relying solely on traditional price-driven advantages such as low costs. Through these plans, Malaysia aims to secure stable export earnings, attract sustained levels of foreign direct investment (FDI), and create an environment conducive to investment and innovation.
The overarching narrative is that a flexible exchange rate regime can still be compatible with long-run stability, provided that it is complemented by a robust set of structural reforms and policy measures. The central bank’s stance is that short-term volatility can be mitigated through disciplined management of liquidity and risk, while the longer-term trajectory requires strengthening the fundamentals of the economy. This dual approach—careful, targeted interventions in the FX market combined with broad-based reforms—forms the backbone of a strategy to sustain growth, competitiveness, and resilience.
In sum, the 2024 annual assessment presents a nuanced view: the flexible exchange rate regime is an appropriate tool to navigate short-term risks to the ringgit, but long-term stability rests on converting efficiency gains into durable macroeconomic strength. As Malaysia continues to deepen its financial markets and implement transformative industrial and energy policies, the currency’s stability is anticipated to emerge from a more resilient and competitive economy—an outcome consistent with a regime that accommodates fluctuations while promoting structural improvement and sustained growth.
Managing Short-Term Volatility: The Mechanics of FX Interventions and Liquidity Management
To address the depreciation pressures observed in 2024, BNM prioritized managing excessive currency volatility through a set of targeted foreign exchange interventions. The central bank aimed to stabilize short-term swings without compromising the underlying economic fundamentals. This approach underscores a broader policy objective: to preserve confidence in the currency and the financial system, while maintaining the capacity of the monetary framework to support growth.
A central element of this effort involved the judicious use of Malaysia’s international reserves. By deploying reserves selectively, BNM sought to counter disorderly market conditions that could disrupt orderly price discovery or undermine financial stability. The selective use of reserves is designed to prevent abrupt moves in the ringgit that could ripple through trade, investment, and consumer sentiment. This restrained approach is consistent with a broader policy emphasis on ensuring that interventions do not distort the market beyond what is necessary to maintain stability or signal policy intent.
Crucially, BNM’s framework recognizes that interventions must be implemented within the context of a robust and well-functioning financial system. A sound financial system with strong supervisory oversight, deep and liquid markets, and transparent mechanisms for risk management is better positioned to absorb volatility. The bank therefore positions FX interventions as a complement to domestic policy measures—not as a substitute for structural reforms that enhance resilience, productivity, and competitiveness.
The central bank’s communications highlight the delicate balance that policymakers face: interventions should dampen excessive, short-term fluctuations while preserving the flexibility necessary for the economy to respond to changing external conditions. This balance requires vigilance and constant assessment of market conditions, expectations, and macroeconomic indicators. The objective is to avoid a scenario in which market participants anticipate ongoing and heavy interventions, which could distort pricing signals, impede efficient capital allocation, and invite moral hazard.
In addition to direct FX actions, BNM has emphasized the importance of developing a deeper local currency market. Deepening the domestic forex market is seen as a cornerstone of long-term stability because it enhances the market’s ability to absorb shocks, improves price formation, and broadens the range of financial instruments available to participants. The QRI program is a tangible illustration of this strategy, linking overseas investment activity to domestic currency demand and liquidity. By enabling foreign currency proceeds to be repatriated in ringgit, the program supports the integrity of the local currency market and helps maintain balanced capital flows.
BNM’s approach to volatility management also involves recognizing the limits of intervention. The central bank acknowledges that while FX actions can provide crucial short-term relief, they cannot address all the drivers of exchange rate movement. Global shocks, shifts in risk appetite, and fundamental domestic factors all contribute to currency dynamics. Therefore, the policy stance integrates monetary operations with macroeconomic stabilization and structural reforms to ensure a coherent and durable response to volatility.
In this context, the bank’s efforts to curb volatility are part of a broader strategy to safeguard macroeconomic stability and sustain growth momentum. The aim is to ensure that any corrective actions in the FX arena reinforce, rather than undermine, the long-run trajectory of productivity, investment, and external competitiveness. By combining prudent liquidity management, selective intervention, and market deepening measures, BNM seeks to create a more resilient macroeconomic environment capable of withstanding external shocks.
Finally, the FX management framework reflects a forward-looking orientation: the bank recognizes that episodes of volatility are a natural feature of open economies. The policy emphasis is on ensuring that such volatility remains within manageable bounds and does not derail the economy’s broader development path. With this stance, BNM seeks to preserve monetary policy autonomy, maintain financial stability, and support sustainable growth—an objective aligned with the needs of a diversified, outward-oriented economy facing a complex global landscape.
Deepening the Local Forex Market: The QRI Program and Market-Development Efforts
A notable feature of BNM’s policy stance is the emphasis on deepening the local foreign exchange market as a structural reform aimed at improving resilience. Among the concrete measures is the Qualified Resident Investor (QRI) program, designed to enhance the capacity of the domestic market to absorb currency flows and to support demand for the ringgit. The program, launched in April 2024, targets the repatriation of foreign currency proceeds from overseas investments into Malaysia’s currency, with the objective of generating a more balanced currency flow and a more stable demand for the local unit.
The QRI initiative is positioned as a tool to reduce reliance on external markets for currency liquidity by creating a more integrated relationship between overseas investment activities and the domestic financial system. This linkage can help stabilize the ringgit by promoting orderly capital movements that align with Malaysia’s financial market structure and policy goals. By building liquidity depth and improving the efficiency of price discovery in the FX market, the program contributes to more predictable exchange rate dynamics and supports investor confidence.
Beyond the QRI program, BNM has signaled a broader commitment to market development as a core instrument for long-term exchange rate stability. Deepening the local currency market is seen as essential to enabling the economy to withstand external shocks with greater ease. A more robust domestic market enhances the transmission mechanism of monetary policy and reduces the system’s exposure to volatile external conditions. As liquidity improves and market participants gain access to a wider set of instruments and hedging tools, the ringgit can move more fluidly in response to shifts in global demand and risk sentiment.
This market-development agenda is embedded within a larger framework of structural reforms designed to strengthen the Malaysian economy. By cultivating a more sophisticated financial ecosystem—one that supports efficient risk management, diversified funding sources, and resilient capital flows—BNM aims to reduce vulnerability to external shocks. The result is a more stable currency that can better support sustainable growth in the face of global fluctuations.
The QRI program’s success, like other market-deepening measures, depends on careful design, effective supervision, and ongoing evaluation. The central bank has underscored the importance of ensuring that these mechanisms serve the broader objective of macroeconomic resilience and productivity growth. The program is intended to complement other policy tools, rather than operate in isolation, reinforcing the economy’s capacity to weather volatility without compromising long-term goals.
As Malaysia advances its market-development agenda, the central bank remains focused on reinforcing the currency’s role in underpinning economic stability. The combined effect of FX management, reserve discipline, and market deepening is expected to support a more balanced and sustainable exchange rate, which, in turn, contributes to a more predictable investment climate and confidence among domestic and international stakeholders.
Building a Stronger Ringgit: Policy Pathways for Durable Stability
BNM asserts that while the ringgit remains susceptible to short-term external pressures, a deliberate policy trajectory can yield a more stable currency over time. The bank emphasizes that ongoing policy initiatives aimed at strengthening Malaysia’s investment appeal and deepening local currency markets provide a more durable foundation for exchange-rate stability than episodic interventions alone. The underlying logic is that a sustainable currency requires solid economic fundamentals, not just currency-market tactics.
A central theme is the shift from discretionary FX interventions toward structural improvements that address the root causes of volatility. By fostering stronger productivity growth, improving competitiveness, and enhancing investment incentives, Malaysia can raise its potential growth rate and create conditions in which the ringgit’s value reflects real economic strength rather than cyclical fluctuations. This approach aligns with the broader vision of turning Malaysia into a higher-value economy capable of withstanding global financial stress.
The policy stance also stresses the need for resilience in the face of external contingencies. A robust external position—supported by a healthy current account, ample reserves, and diversified sources of export demand—helps absorb shocks and reduces the likelihood that a currency shock will derail the economy. In this sense, the ringgit’s stability is framed as a byproduct of strong macroeconomic foundations rather than a direct result of continuous, heavy-handed exchange-rate management.
In practice, the strategy involves a combination of policy tools designed to sustain investment and growth. These include structural reforms to boost productivity, mechanisms to improve the business environment, and continued improvements in the investment climate to attract both domestic and foreign investment. The objective is to create a self-reinforcing cycle in which continued investment drives productivity gains, which in turn support sustainable growth and confidence in the ringgit.
The ongoing policy journey also calls attention to the importance of fiscal sustainability and comprehensive macroeconomic management. While monetary policy and FX management play critical roles, they operate within a wider policy ecosystem that includes tax policy, public investment, and sectoral strategies. The aim is to coordinate these levers in a way that strengthens long-term competitiveness, enhances export earnings, and fosters a stable macroeconomic environment that supports a resilient currency.
BNM’s forward-looking stance thus centers on structural transformation as the principal engine of currency stability. The bank argues that genuine, lasting stability will emerge as Malaysia’s economy becomes more productive, innovative, and integrated into high-value global supply chains. In this context, the ringgit’s durability is not about suppressing its fluctuations but about ensuring that its movements align with the country’s evolving growth fundamentals. The overarching expectation is that, as NIMP 2030 and NETR progress, the ringgit will reflect a stronger, more stable trajectory aligned with Malaysia’s broader development ambitions.
The Role of Structural Reforms: NIMP 2030, NETR, and the Path to Higher-Value Industries
Central to BNM’s long-term stability narrative are the government’s strategic reforms and plans designed to reposition Malaysia for higher productivity and more sophisticated exports. The New Industrial Master Plan 2030 (NIMP) and the National Energy Transition Roadmap (NETR) are presented as critical instruments for moving Malaysian industries toward higher-quality, more complex, and diverse products. The policy framework seeks to shift away from a dependence on low-cost advantages toward a valuation-driven growth path that emphasizes innovation, technology adoption, and upgraded capabilities across sectors.
Under these plans, Malaysia aims to elevate its export mix by prioritizing higher-value added goods and services, thereby increasing export value and creating more resilient earnings streams for firms. The expectation is that improved product quality, along with greater diversification, will attract more stable and higher levels of foreign direct investment. In turn, these flows are expected to strengthen the ringgit by anchoring demand for the domestic economy’s currency, even amid global financial stress. The broader objective is to establish a durable link between macroeconomic stability and timely, strategic investment in the country’s productive capacity.
NIMP 2030 envisions a framework in which industries are encouraged to evolve toward more sophisticated production processes, advanced manufacturing, and technology-enabled sectors. This involves fostering public-private collaboration, upgrading skill sets, and facilitating access to capital for research and development. The plan also emphasizes upgrading infrastructure and logistics to support efficiency and competitiveness, while promoting a climate conducive to private investment. The result is a domestic economy better positioned to capture more value from global supply chains and to withstand external shocks.
NETR’s focus on energy transition aligns with a global shift toward sustainable and low-emission energy sources. The roadmap outlines strategies to diversify energy sources, improve efficiency, and accelerate the adoption of new technologies. This transition is not only an environmental objective but also an economic strategy to strengthen productivity and resilience in energy-intensive sectors. By supporting sectors that adopt cleaner and more efficient energy use, NETR contributes to lower production costs and more stable operating conditions for Malaysian industries, which can have positive implications for the ringgit’s stability and Malaysia’s long-run growth prospects.
The combination of NIMP 2030 and NETR is envisioned to create a more dynamic and competitive economy. This includes a stronger emphasis on moving up the value chain, producing more complex and diverse products, and enhancing the quality and competitiveness of Malaysian exports. The anticipated spillovers—higher value-added earnings, more stable cash flows for firms, and improved investor confidence—are expected to translate into stronger macroeconomic fundamentals. A stronger, more resilient economy supports a firmer ringgit over time by preserving fiscal space, maintaining current account stability, and reducing vulnerabilities to adverse external shocks.
In practice, these plans require consistent policy coherence, effective governance, and robust implementation. The central bank notes that structural reforms and market development must be pursued in a coordinated manner with fiscal policy and the broader economic strategy. The goal is to create a virtuous cycle in which productivity gains and investment inflows reinforce external stability, which in turn supports sustainable currency strength and macroeconomic resilience. As Malaysia advances these plans, the ringgit’s trajectory is expected to reflect the economy’s improving capacity to generate value, diversify risk, and maintain competitiveness in a shifting global environment.
The Bottom Line: Why Structural Reforms matter for Long-Term Ringgit Stability
BNM’s 2024 assessment emphasizes a core principle: long-term currency stability is inseparable from the strength and resilience of the real economy. While short-term exchange rate management remains a tool to smooth volatility and support market functioning, the central bank’s emphasis is that durable stability depends on structural reforms that boost productivity, competitiveness, and investment appeal. The policy stance suggests a strategic shift away from relying predominantly on international reserves to counter long-run drivers, toward a more balanced approach that combines prudent FX management with decisive reforms aimed at enhancing the country’s growth potential.
In this light, the ringgit’s performance is framed as a reflection of Malaysia’s macroeconomic fundamentals and structural trajectory. The ongoing efforts to deepen the local currency market and to promote more balanced capital flows through programs like QRI contribute to a more resilient exchange rate regime. At the same time, NIMP 2030 and NETR represent ambitious steps to transform the industrial landscape and energy economy, with the intention of creating higher-quality exports, more diversified earnings, and attractive conditions for investment. Taken together, these elements are designed to fortify the ringgit’s stability by strengthening the foundations of growth, domestic demand, and external competitiveness.
BNM’s strategic stance presents a nuanced view of how a developing economy like Malaysia can navigate volatile global conditions. By combining selective FX interventions with a robust market-deepening agenda and a credible reform program, the country aims to achieve a sustainable pattern of exchange-rate dynamics that supports both current stability and long-run potential. The overarching message is that currency stability is not a one-off outcome of policy tinkering but the natural consequence of a well-designed, growth-oriented policy ecosystem that reinforces productivity, investment, and resilience.
Conclusion
Bank Negara Malaysia’s 2024 annual review reinforces the position that a flexible exchange rate regime can serve as a prudent mechanism to manage short-term risk while signaling that lasting stability requires strengthening the economic foundations. The ringgit’s depreciation amid external pressures is framed as a normal, manageable response within a broader strategy that seeks to balance liquidity, market integrity, and macroeconomic fundamentals. Through targeted interventions, selective use of reserves, and measures to deepen the local foreign exchange market—most notably the QRI program—BNM demonstrates a comprehensive approach to stabilizing the currency without sacrificing growth.
Looking ahead, the central bank foregrounds structural reforms as the engine of durable stability. The government’s comprehensive initiatives, including the New Industrial Master Plan 2030 and the National Energy Transition Roadmap, are positioned as vital levers to elevate Malaysia’s productivity, competitiveness, and export sophistication. By moving industries up the value chain, focusing on higher-quality and more diverse products, and attracting sustained levels of foreign direct investment, Malaysia aims to secure more stable export earnings and stronger external demand for the ringgit. In this framework, a stronger and more stable ringgit is expected to emerge from a resilient, innovation-driven economy rather than from continuous, precautionary FX interventions alone. The path to long-term currency stability lies in unleashing structural growth and ensuring that policy actions reinforce each other to sustain momentum through both calm and storm in the global economy.