KUCHING: The notion of Sarawak introducing its own currency has raised questions about its economic viability, with an expert suggesting that such a move must be supported by robust fiscal and monetary policies.
Economist Datuk Dr Madeline Berma has highlighted that the primary objective behind introducing a new currency in Sarawak is to simplify financial transactions within the region and, more importantly, to ensure both economic and financial stability not only in Sarawak but also across Malaysia.
To achieve this, Dr Madeline stressed the need for a well-established institutional framework that can effectively manage financial fluctuations.
She elaborated that key considerations encompass the selection of an appropriate exchange rate system, currency convertibility, relevant financial regulations, the establishment of a comprehensive central bank, and a smooth transition process towards adopting the new currency.
Dr Madeline further said that having a distinct currency for Sarawak is not economically viable due to the existence of Malaysia’s national currency, which is managed by the Bank Negara Malaysia (BNM).
“The national currency serves as the officially recognised medium of exchange for goods and services within a country. It is regulated by the central bank and holds a predominant position in trade and commerce. Any potential Sarawak currency could only be utilised within the state, limiting its usage to local economic transactions,” she explained.
While it may not be feasible for Sarawak to introduce its own currency from an economic standpoint, Dr Madeline noted that various states, including Sarawak, have historically created local currencies for reasons beyond economics.
“Some states choose to establish their own currencies to promote spending within the state’s boundaries or to signify state sovereignty, rather than purely economic motives. For instance, post-Soviet and Eastern European countries regained independence and issued their own currencies,” she elaborated.
Dr Madeline clarified that such local currencies might emerge due to a lack of trust in the national currency. She referred to situations where communities exhibit scepticism towards the stability of the official legal tender.
“In certain contexts, the demand for a local currency arises when there’s a lack of faith in the national currency. This phenomenon isn’t uncommon, particularly in regions such as South America and Africa, where high inflation rates prompt communities to seek alternative means of conducting trade,” she said.
