KUALA LUMPUR, Malaysia (AP) — Malaysian Prime Minister Najib Razak said Monday the government will pump 20 billion ringgit ($4.6 billion) into an equity fund to support the stock market and ruled out capital controls despite the ringgit's plunge.
The Malaysian ringgit is down 26 percent from a year earlier, breaching 4 ringgit to the dollar last month, it's weakest level in 17 years. The stock market is down 7.5 percent in the past three months.
Najib reiterated the government has no plans to bring back capital controls as Malaysia's economy and financial system are in far better shape than during the Asian financial crisis. Malaysia pegged the ringgit at 3.80 to the U.S. dollar and imposed capital curbs in September 1998 during the crisis.
He said Monday that share fund ValueCap, which was set up in 2002, will be revived with 20 billion ringgit capital.
"ValueCap was created to support undervalued shares and it had proven to be effective in stabilizing the equity market," he said. ValueCap's shareholders include state funds Permodalan Nasional Berhad, Employees Pension Fund and Khazanah Nasional Berhad.
Malaysia's economic malaise worsened in recent months after revelations $700 million of unknown provenance had landed in Najib's bank accounts, tarnishing the country's image. Najib has denied any wrongdoing and authorities later said it was donations that originated in the Middle East.
Concerns over alleged mismanagement at state investment fund 1MDB, which has accumulated 42 billion ringgit ($9.7 billion) in debt since it was formed in 2009 to develop new industries, also added to economic blues.
Najib said the government is committed to resolving 1MDB's problems in a transparent manner.
He said the ringgit's decline will not have any major impact on government debt as 97 percent of the debt is denominated in ringgit and mostly funded by domestic sources. The government will build more clinics for the poor and provide more affordable housing for young couples, he said.
This story was corrected to show that ValueCap was created in 2002.