Former PM says he was told by the late BNM governor Jaffar Hussein that forex trading was aimed at strengthening the central bank’s reserves and stabilising the ringgit.
PUTRAJAYA: Dr Mahathir Mohamad said Bank Negara Malaysia (BNM) conducted forex trading in the late 1980s without his knowledge, the Royal Commission of Inquiry (RCI) heard today.
The former prime minister said BNM’s then governor Jaffar Hussein made the decision in order to stabilise volatile forex rates, manage the bank’s external reserves and sustain the nation’s economy.
“Although I came to know about it later, I accepted the reason that it was done under the management of Jaffar,” he told the five-man tribunal chaired by Mohd Sidek Hassan.
Mahathir said he did not know personally or in detail anything about the losses and profits of forex trading by BNM when he was prime minister.
The 92-year-old, who is the 24th witness, said he did not have any knowledge or reason to believe that BNM’s activities went against existing banking laws.
“As prime minister, I would have taken the appropriate steps if there was reason to believe otherwise,” he said in his witness statement.
Mahathir said that during the late 1980s, he came to know that the strengthening of the Japanese yen through market intervention by several developed countries caused losses to many developing countries.
“Malaysia suffered from the negative effects as Japanese loans became expensive by three folds in Malaysian ringgit due to the Plaza Accord (by these developed countries),” he said.
Mahathir said he was once invited by Jaffar to visit BNM’s trading room in Kuala Lumpur in the late 1980s.
To his recollection, he said he was there for about 30 minutes and Jaffar told him that BNM’s activities then were aimed at strengthening its reserves and stabilising the ringgit.
Mahathir said to his understanding and belief, BNM was required to submit its audited annual report to the finance minister to be tabled in Parliament.
“However, the finance minister will first present it to the Cabinet before tabling it in Parliament,” he said.
He said if his memory served him right, the 1992 report was discussed in a Cabinet meeting in early 1993.
“What was deliberated during the Cabinet meeting was similar to what was presented in Parliament,” he said.
In the previous RCI session on Sept 9, Sidek accused former finance minister Anwar Ibrahim of misleading the Cabinet by stating that the actual losses for 1992 were RM12 billion.
Anwar shot back, saying the audited report revealed the losses amounted to only RM5.7 billion.
Mahathir said he also did not interfere in the affairs of BNM as it was an autonomous body.
“To my knowledge as PM, the BNM conducted its operations and management independently as it is a corporate body set up under the Central Bank of Malaysia Ordinance 1958,” he said.
He said the central bank had its own management structure which was led by its governor, who from time to time reported to its board of directors.
“The board is responsible for all policy and administrative issues and I believed I did not have the legal powers to interfere,” he said.
He added, however, that it did not mean the governor did not discuss the bank’s matters in general terms during their informal meetings.