KUALA LUMPUR (Oct 17): The option to use capital control at the moment could be fairly premature, according to AmBank Group chief economist and head of research Dr Anthony Dass.

Dass was commenting on a report quoting Bank Negara Malaysia (BNM) governor Datuk Seri Nor Shamsiah Mohd Yunus as saying that Asian countries facing increased market volatility need the option to use capital controls to pre-empt financial crises.

“Countries in this region should be allowed to use capital flow regimen policies as a legitimate policy tool that can be deployed in a pre-emptive manner to deal with potential risk to financial market stability,” Nor Shamsiah told the Financial Times yesterday on the sidelines of the International Monetary Fund (IMF) and World Bank annual meetings in Bali, Indonesia.

The British daily also quoted her as saying that “there is a lot of stigma in the use of capital flow” management.

Dass however said that should the global volatility remains strong that results in huge capital outflow from this region added with domestic pressure especially with the risk of rising fiscal deficit/GDP and the challenge to lower the public debt/GDP should result into weakening pressure on the ringgit.

“If the depreciation turns out to be drastic, it will further add pressure on the country to finance its US$ denominated debt, likewise for other emerging market (EM) countries with high US dollar denominated debt.

“Such pressure may potentially provide justification for capital control to come into the picture.

“So capital control may not be confined to Malaysia but by troubled EM countries,” he said.