KUALA LUMPUR, Aug 4 ― The only way to stop the continuing decline of the ringgit is to temper the political uncertainty that arose from the 1Malaysia Development Berhad (1MDB) controversy and the recent Cabinet reshuffling, economist Prof Emeritus Zakariah Abdul Rashid said today.

Zakariah, the Malaysian Institute of Economic Research (MIER) executive director, said the country is facing the “disease” of low public confidence in its economic health.

“We got the symptom, we got the disease, but there is no economic solution to cure the disease. Up to our political leaders to ponder and give a solution to this.

“If they are willing to do it, all of us will be very happy to see the economy will be back to the right track,” he said when answering questions during the MIER's 30th National Economic Briefing here.

Speaking to reporters later, Zakariah said the current complicated political environment has imposed pressure on public confidence towards the economy.

“It started from the public's lack of confidence on how we handle 1MDB, now it has shifted to the deputy prime minister and several Cabinet ministers that had their service terminated,” he explained, referring to the controversy over state-owned firm 1Malaysia Development Berhad.

Earlier during the question and answer session following Zakariah's briefing, economist Prof Emeritus Datuk Mohamed Ariff Abdul Kareem noted that Bank Negara Malaysia had spent US$5 billion (RM19.26 billion) last month to prop up the ringgit, but said the local currency's value only strengthened by a few cents before dipping again.

Speaking up as one of those briefed, he commented: “The intervention here is to merely treat the symptom, not to fix the disease.”

He said the falling ringgit value was merely a symptom of the country's actual problem of a lack of confidence in the economy and a credibility crisis.

“We have to speak the truth, we have to come clean, that I think is what is lacking, that has to be fixed.

“If that is not fixed, no amount of intervention by the central bank will have any lasting impact, we will simply be losing the reserves we have,” the academic attached to the International Centre for Education in Islamic Finance (Inceif) said in his comment after Zakariah's briefing.

Universiti Pertahanan Nasional Malaysia's Prof Rugayah Mohamed, who was also present at the briefing by Zakariah, disagreed however that there was no economic solution available.

“You can always come up with economic solutions so long as the political problems do not overwhelm...There can be if the political masters listen to us and maybe if civil society can start talking and raising questions about the real economic situation.

“So don't get sidetracked by political innuendos but stay focused and ask about the economic situation,” the MIER associate research fellow said.

Just days after his deputy Tan Sri Muhyiddin Yassin pressed for more answers on 1MDB, Najib announced a Cabinet reshuffle that saw the former losing his post and those seen as loyal to the prime minister gaining ministerial posts.

The ringgit, which this year hit a 16-year low, has been falling since the Cabinet reshuffle last Tuesday and went down to 3.86 to the dollar today.

Aided by Bank Negara Malaysia's intervention, the ringgit has been hovering around the 3.8 peg to a US dollar ― a measure introduced during the 1998 Asian financial crisis and which was removed in 2005.

The US-based Wall Street Journal had in a July 2 report said Malaysian investigators' findings that a US$700 million money trail had passed through several entities including a former 1MDB subsidiary before being channelled to accounts believed to belong to Prime Minister Datuk Seri Najib Razak.

Yesterday, the Malaysian Anti-Corruption Commission said it had found that RM2.6 billion of funds had entered Najib's accounts, but said these funds were from donations and not 1MDB.