The Parti Islam se-Malaysia is proposing to issue the Islamic dinar as currency in Kelantan state, a move seen as challenging the Islamic credentials of Prime Minister Abdullah Badawi.
Mr Abdullah immediately rejected the plan. 'It is against the law for states to issue their own currencies,' he told the Bernama news agency from Egypt, where he attended a World Economic Forum meeting before heading to Japan.
Analysts said Mr Abdullah was more worried about the political fallout than the financial implications.
PAS has controlled Kelantan since 1990 but saw its margin in the state assembly shrink to three seats in the 2004 elections. It leads the opposition coalition at the national level.
'From experience we know that PAS will press on with the issue and make political capital out of it,' said Abdul Razak Baginda, executive director of the Malaysian Strategic Research Centre.
Lawyer A. Sivanesan: 'It's a rebellion to issue your own currency.'
Several bankers described the plan as a political gimmick. 'They are back to their usual tricks,' said one banker who did not want to be identified.
