KUALA LUMPUR, Oct 10: Malaysia’s four-year-old currency peg of 3.8 ringgit to the dollar has proven to be sustainable and would remain in place, Prime Minister Mahathir Mohamad said on Thursday.

It has sustained until now, September 1998 until now, Mahathir told reporters when asked if the peg was sustainable.

Nobody is complaining, our economy is doing well, there is no black market in the Malaysian currency, so the pegging was good. Everybody accepts it, said Mahathir, who is also the Southeast Asian country’s finance minister.

Other countries if they do that kind of thing, the probability is that there will be black market, not here.

The ringgit was fixed to the greenback as part of capital controls imposed in 1998 after the economy plunged into a recession. All the curbs apart from the peg have since been lifted.

While the peg has contributed to short-term stability, some economists warned maintaining it could rein in potential economic growth and lead to the inefficient allocation of resources.

Steven Xu, Asia economic research chief of SG Securities in Hong Kong, was quoted by The Sun as saying the peg would drain resources of the central bank and raise the costs of doing business.

Malaysia would have to pay a price for the peg. Its economic growth over the medium-term would undershoot its potential growth trajectory... the peg would moderate the country’s growth, he said.

Malaysia could weather any short-term disruption arising from a peg removal as its financial systems have been strengthened since the 1997-1998 regional economic crisis, he added.

Mahathir’s special financial adviser Nor Mohamed Yakcop earlier this year said the government saw no advantages of unpegging amid volatility in regional currencies.

Mahathir has said Malaysia may review the policy only if the yen hit 140 to the dollar, if the Chinese yuan was devalued or if regional currencies fell by 20 per cent and stayed there.

But Trade Minister Rafidah Aziz has said those conditions were unlikely to be met in the near term.—AFP