Malaysian Prime Minister Mahathir Mohamad has denied rumours he may be about to impose capital controls, but admits there has been a rift with his central bank over lowering interest rates. 'We have no intention of controlling capital movement,' Dr Mahathir said after a weekend conference on Islamic financial-services products. His denial contradicts comments made by central bank officials following the resignation of Bank Negara governor Ahmad Mohamad Don and his deputy, Fong Weng Phak. Unnamed officials said Mr Ahmad had resigned because he was a man of principle who did not want to put his signature on measures to promote capital control. Dr Mahathir said: 'They wanted to quit. The papers said due to disagreements [over rates], so I think I will accept that. 'We have some differences,' he said. 'For example, the government has never agreed to this idea that we should raise interest rates and dry up credit. 'And because of this we have second-quarter [economic data], for example - the contraction has been worse than expected.' Last week, Malaysia announced a 6.8 per cent contraction in economic growth, its second consecutive quarter of negative growth, putting the country in its first recession in 13 years. Earlier, Malaysia adopted similar economic measures to those advocated by the International Monetary Fund to counter the financial collapse in Thailand, South Korea and Indonesia - namely tight fiscal and monetary control, austerity measures and high interest rates to protect its currency. The central bank and Deputy Prime Minister Anwar Ibrahim championed this approach, though Dr Mahathir insists he was never a convert. Having tried it, the prime minister says he is now even more convinced the IMF approach does not work and claims to be drawing up 'shocking' and 'extraordinary' economic measures of his own. A stencil for the new approach was outlined in a national economic recovery plan on July 23, which included expansionary measures and lowering interest rates to try to ease the domestic-debt burden and to stimulate spending. However, Dr Mahathir has still not unveiled his big 'shock', which many have guessed would be curbs on the outflow of capital to safeguard the currency as interests rate progressively come down. Mr Anwar, who is also finance minister, further stoked speculation on Friday when he said the government was considering measures to stabilise the currency. Also on Friday, Dr Mahathir was quoted by the official Bernama news agency saying Malaysia faced unusual problems that required unusual solutions. Despite Mr Ahmad's reluctance, Malaysia has cut interest rates three times in less than a month. Malayan Banking and RHB Bank on Saturday reduced base lending rates again from Tuesday - this time from 10.9 to 10.3 per cent. Dr Mahathir said: 'We thought that he [Mr Ahmad] would have resigned long ago because he knows, of course, we did not approve of the policy recommended by him. But he chose not to resign before.' Deputy Finance Minister Affifudin Omar said: 'In Malaysia, politicians are the ones who determine the policy. If professionals could not accept it, it's up to them to determine their position.'