PUTRAJAYA, Aug 20 ― The government supports Bank Negara Malaysia's (BNM) freedom to set the country's monetary policy and implement its other mandated responsibilities, Datuk Seri Najib Razak said today.

The prime minister said the government is also committed to continuing with strengthening the fiscal situation, including continuing to implement the Goods and Services Tax (GST) and reducing the fiscal deficit in stages towards achieving a balanced budget by 2020.

Najib, who is also Finance Minister, said the government will not impose capital controls nor peg the ringgit in view of the strong economic fundamentals and an environment that is different from that during the 1997-1998 Asian financial crisis.

“It is BNM's responsibility to set the nation's monetary policy. The government supports BNM's independence in implementing this besides its other mandated responsibilities,” he said at a media conference at Perdana Putra here.

The prime minister said the government has been closely monitoring the latest developments in the financial market including currency movements, adding the Cabinet as well as the Economic Council have discussed this matter in detail.

He said BNM Governor Tan Sri Dr Zeti Akhtar Aziz had also given special briefings to the Economic Council on August 17 and the Cabinet on August 19 while yesterday he had discussions with local and foreign economists and analysts on the economic and financial market situation.

Najib said following the discussions, the government decided that the nation's economic fumdamentals are still strong, as reflected in last week's announcement of a 4.9 per cent growth in the Gross Domestic Product (GDP) in the second quarter of 2015.

He said the economy's structure remains strong, supported by the services and manufacturing sector which contributed 76.6 per cent to GDP although the contribution of the mining sectors including oil and gas as well as agriculture declined to 17.9 per cent.

“The structure of the economy, which is being diversified, has reduced the government's dependence on oil and gas revenue,” he said, adding the diversification measures have enabled a reduction in oil-based revenue from 41 per cent in 2009 to below 30 per cent last year.

“In this matter, the government will continue with the economic transformation programme to strengthen the economy's structure and enhance diversification,” he said.

Najib said the country's labour market remains stable, with a low unemployment rate of 3.1 per cent in May 2015 and the inflation rate staying low.

“The financial system's resilience remains strong. The domestic financial market continues to function smoothly, and financial intermediation activity continues to work efficiently, meeting the financial and financing needs of the domestic economy,” he explained.

Asked about the private sector's feedback on Malaysia's economic situation, Najib said they understand the government's policy and market-friendly approach.

“Basically, they like the policy and they also realise that there are mainly external factors affecting the ringgit,” he said.

Asked whether the ringgit's uncertain movements have affected investments into Malaysia, Najib said the investment flows are still strong.

“We hope they (investors) can take both short- and long-term views, as the   economic strengthening, fiscal consolidation, balanced budget and transformation are certain to bring positive economic impacts,” he said. ― Bernama