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Wednesday, September 2, 1998 Published at 23:07 GMT 00:07 UK

World: Asia-Pacific

Armed police stand by in Kuala Lumpur

Rumours of Mr Anwar's imminent arrest have angered his supporters

One of Malaysia's most senior politicians, Anwar Ibrahim, is at home in the capital, Kuala Lumpur, after being sacked from his post as deputy prime minister and finance minister.

The BBC's Simon Ingram: "Mr Anwar's arrest appears imminent"
Hundreds of his supporters gathered near his residence, as police maintained a strong presence outside. Mr Anwar is reported to have asked his supporters to remain calm.

The chief of police said Mr Anwar was under investigation but was not being detained for now.

Inspector-General Abdul Rahim Noor said police had been stationed outside Anwar's offices to prevent the removal of government documents.

But he denied that Anwar was under house arrest. "The rumour is not true. Datuk Seri Anwar has not been arrested. He is not arrested for now," he said.

[ image: Mahathir Mohamed had clashed with his deputy]
Mahathir Mohamed had clashed with his deputy
The BBC South East Asia correspondent, Simon Ingram, says this remark will do nothing to dampen speculation that Mr Anwar may face charges under the internal security laws.

He says Mr Anwar's removal follows a power struggle with the prime minister, Mahathir Mohamed, over the handling of Malaysia's economic troubles.

Economic disagreements

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.

Malaysia's currency, the ringgit, and the markets have plummeted since the Asian economic crisis broke out in July 1997. The ringgit is now only worth about 40% of its US dollar value in mid-1997.

[ image: Malaysia traders watch the events unfold]
Malaysia traders watch the events unfold
The country's economy, which boasted 8% growth for the last decade, formally went into recession last week after figures showed its economy shrank by 6.8% over the last year.

Mr Anwar and the central bank had preferred high interest rates and austerity measures to control Malaysia's sliding currency. But the prime minister and his chief economic aide, Daim Zainuddin, have pushed for greater government spending and lower rates to boost the economy.

Currency controls

On Tuesday, the prime minister and central bank officials announced currency exchange controls. 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 decision to impose the sweeping controls to prop up the value of the ringgit has been criticised by the International Monetary Fund (IMF).

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

Trading on the Kuala Lumpur stock exchange on Thursday has been confused with almost all of early losses being recovered by mid-morning.

Political battle

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

However the prime minister moved quickly to crush a campaign against nepotism at high government levels.

In recent weeks, Mr 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 but some political observers saw the book as a part of a campaign designed to humiliate the deputy prime minister and push him towards resignation.

Our correspondent says Mr Anwar does still retain a strong following among the Umno youth movement and among Islamic groups, who share his more conservative religious views.

These elements must now decide whether to stay with their man or abandon him in the face of the unsavoury allegations being prepared against him.

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