The ringgit went lower against the US dollar yesterday at RM 4.51 putting pressure on the cost of imported inputs and materials for many businesses, especially SMEs. Prime Minister Ismail Sabri may be more concerned about the date of the general election than the continued depreciation of the ringgit but he must offer financial support for affected businesses.
Early this year I had suggested a bank loan moratorium and waiver of interest for a period of 6 months for both the poorest individual borrowers and small and medium enterprises (SMEs) to assist their revival under the post COVID-19 pandemic recovery. Whilst there is growing support for the bank loan moratorium for SMEs due to the hike in Overnight Policy Rate(OPR) by Bank Negara from 2.25% to 2.5% recently, a bank loan moratorium will only happen if there is another similar Memorandum of Understanding (MOU) 2.0 between PH and the Prime Minister or if the general elections are held next year instead of this year.
The historic MOU signed between PH and the Malaysian government on 13 September 2021, agreed to our proposals for a waiver of interest rate and bank loan moratorium for the lower income groups, together with an additional RM45 billion cash injection to give extra financial aid and grants to help businesses especially SMEs. The extra benefits enjoyed by the public and businesses today were a direct result of the MOU signed between all PH top leaders and the Prime Minister.
Whilst some may say that the outcome of whether or not to grant the bank loan moratoriums is dependent on banks, it is ultimately political will and not private banking considerations, that will prove decisive just as happened when the first MOU was signed. PH will provide the necessary political and public support not just for a bank loan moratorium but also for an interest rate waiver for a specified period to help target groups. The government must give priority to the needs of the rakyat over the rather ample profit considerations of the banking sector.
The government may be overly optimistic that the robust economic growth trajectory this year will overcome all the underlying economic issues related to stagnant wages, diminishing purchasing power of consumers and business revenues. However, such growth is uneven following a host of new challenges such as soaring food prices and rising costs associated with global inflation caused by the Ukraine war and supply chain disruptions, severe foreign labour shortages that remained unresolved, depreciating ringgit, inconsistent policy-making and U-turns, bureaucratic red-tape and poor governance.
For this reason, SMEs require financial assistance from the government, including a bank loan moratorium and interest rate waivers, to ensure their business survival post-pandemic similar to the COVID-19 pandemic stage.