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Malaysia's central bank governor-elect pledges stability
[KUALA LUMPUR] Malaysia's incoming central bank Governor Muhammad Ibrahim pledged to maintain the policy stability that his predecessor, Zeti Akhtar Aziz, championed in the 16 years she led the institution.
In his first comments since being appointed by Prime Minister Najib Razak, Mr Muhammad said in a statement on Wednesday that it's "important for the central bank to maintain monetary and financial stability, remain focused on its strategic agenda and work towards contributing to a better future for all Malaysians." A deputy governor since 2010, he takes over from Dr Zeti, 68, for a five-year term starting May 1.
The currency rallied as investor concerns eased that Mr Najib would turn to a candidate who is more politically aligned to the government, compromising the independence of the central bank. Mr Najib has been facing a series of setbacks, including a political scandal and alleged financial irregularities at state fund 1Malaysia Development Bhd.
"With Zeti being replaced by someone from within BNM - Muhammad Ibrahim - this ensures a smooth transition," said Trinh Nguyen, an economist at Natixis Asia Ltd in Hong Kong. "This is much-needed good news for Malaysia." The ringgit rose as much as 0.5 per cent to 3.8930 per dollar on Thursday.
The governor-elect will have to contend with a slowing economy and volatile capital flows, as well as rebuilding reserves that are about 30 per cent below a high seen in 2013.
Growth is forecast to reach 4 per cent to 4.5 per cent this year, down from 5 per cent in 2015, while inflation is projected to accelerate from a year ago.
"Being part of our policy team at the bank will provide continuity and the much needed certainty in this prevailing period of great uncertainty," Dr Zeti said in a statement. "I have great confidence in his ability to lead the bank going forward into the future."
The central bank has kept monetary policy steady to aid domestic demand as Mr Najib counts on consumers to support growth amid constraints in boosting government spending. Mr Najib said on Tuesday that the country faces an "uphill battle" over the next five years in its plan to become a developed nation.
"I'm confident that under his leadership, Bank Negara Malaysia will continue assisting the government with advice to further strengthen Malaysia's economy, as well as managing monetary policy, and regulating and developing the financial services industry," Mr Najib said of Mr Muhammad.
Mr Muhammad, who was born in 1960 and has a master's degree from Harvard University, joined the central bank in 1984 and had been deputy governor since June 2010.
He oversaw international reserve management, and money market and foreign exchange operations. He has served in areas from banking supervision and regulation to insurance and offshore banking.
He was managing director at Danamodal Nasional Bhd, a bank recapitalization agency created under the auspices of Bank Negara during the Asian financial crisis in the 1990s.
Appointed by former Prime Minister Mahathir Mohamad, who rejected the notion of an independent central bank, Dr Zeti won more powers and autonomy for Bank Negara during Mr Najib's premiership with a mandate to ensure financial stability.
She had recently become more critical of the affairs at 1MDB, with the central bank urging criminal proceedings at least twice against the company. Mr Najib chairs the advisory board of 1MDB and has faced calls to resign as premier over alleged mismanagement at the fund.
"The test for the new governor will come more from financial stability management," Reza Siregar, an analyst at Goldman Sachs Group Inc in Singapore, wrote in a research note Wednesday. "Market participants may view any slippage on regulatory vigilance as a risk to the credibility of BNM as a financial system regulator."