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Wednesday, September 2, 1998 Published at 13:45 GMT 14:45 UK

World: Asia-Pacific

Malaysia's deputy prime minister fired

Former Malaysian Deputy Prime Minister Anwar Ibrahim

Malaysian Deputy Prime Minister Anwar Ibrahim has been fired after months of economic policy differences with the prime minister.

The 51-year-old deputy, for years seen as Prime Minister Mahathir Mohamad's successor, had been sidelined and left out of decisions for months after differing with his boss on the course for recovery.

Latest reports say armed police are stationed around Mr Anwar's home where an angry crowd of his supporters has gathered.

There are unconfirmed reports that preparations are under way to arrest him under Malaysia's Internal Security Act.

Economic disagreements

Anwar's sacking came after weeks of rumours about his departure - always followed by emphatic denials.

The first real indication that Anwar was about to go was contained in comments made by the prime minister on Tuesday.

[ image: Mahathir Mohamed had clashed with his deputy]
Mahathir Mohamed had clashed with his deputy
Responding to a question about whether the post of finance minister was about to become vacant, he replied: "There is no truth until it becomes a truth."

A short statement by the prime minister's department said Anwar had been relieved of his positions, including that of finance minister.

Malaysia's currency, the ringgit, and the markets have plummeted since the Asian economic crisis broke out in July 1997.

The South-East Asian country's economy, which boasted 8% growth for the last decade, formally went into recession last week after its economy shrank another 6.8%.

Anwar and the central bank had preferred high interest rates and austerity measures to control Malaysia's sliding currency.

The prime minister and his chief economic aide, Daim Zainuddin, have pushed through a policy of greater government spending and lower rates to boost the economy.

Although he has never openly blamed his finance minister for the economic mess, he openly said tight monetary policies were not going to deliver recovery.

Currency controls

On Tuesday, when the prime minister and central bank officials announced sweeping currency exchange controls, Anwar was not seen in public.

The decision by Malaysia to impose the sweeping controls to prop up the value of the ringgit has been criticised by the International Monetary Fund (IMF).

Under the drastic measures, the ringgit will be indefinitely pegged at 3.8 to the US dollar.

Simon Ingram: "The Central Bank acknowledged that Malaysia was moving into uncharted territory"
Trading in the currency will only be allowed inside Malaysia.

But the IMF said the move could undermine investor confidence and it would be having talks with the Malaysian authorities about the measures.

The ringgit is now only worth about 40% of its dollar value of July 1997.

The Malaysian stockmarket however recovered on Wednesday, after dropping more than 13% when the currency controls were announced on Tuesday.

The Kuala Lumpur Stock Exchange's weighted composite index rose almost 11% by the end of trading.

Pressure to resign

In July, Anwar was seen as being in the forefront of a campaign for political reform when the governing United Malays National Organisation held its annual convention in July.

The prime minister immediately crushed the campaign against nepotism at high government levels.

In recent weeks, Anwar has also been embarrassed by accusations of sexual misconduct contained in a book, '50 Reasons Why Anwar Shouldn't Be Prime Minister'.

The authors are being tried in a court for defamation.

Some political observers saw the book as a part of a campaign to humiliate the deputy prime minister and push him to resign.

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