Finance Minister Tengku Zafrul Abdul Aziz has finally accepted reality by proposing to raise the statutory debt limit to 65% from the current 60% of the gross domestic product (GDP) to support additional direct cash injection to rescue our recession-hit economy. The new government has no choice but to do so, following the disastrous failure of the previous Prime Minister Mahiaddin Md Yassin to overcome both the COVID-19 pandemic and economic crisis that has destroyed countless lives and livelihoods.
Since the serial Movement Control Orders(MCO) were imposed and Emergency Proclamation failed to contain COVID-19, the economy has been badly hit from the ineffectual total lockdowns that caused economic losses of more than RM500 billion. The double-standards in enforcing MCO restrictions between VIPs and ordinary rakyat, the COVID-19 SOPs U-turns, policy flip-flops, breaches in compliance and insufficient direct funding have made both the COVID-19 infections and deaths as well as financial hardship to ordinary Malaysians spiral out of control.
That is the reason why 8 economic stimulus packages amounting to RM 530 billion did not work when the total direct fiscal injection of a mere RM 83 billion pales into insignificance to the RM530 billion economic losses incurred from the total lockdowns. There should be an immediate additional fund injection of RM45 billion and a 3 month waiver of interest during the bank loan moratorium, not only to support businesses, workers and livelihood but also our health services and vaccination programme to battle COVID-19.
Zafrul has confirmed our previous assertions that there is ample liquidity in the RM1.3 billion domestic debt market that the Federal government can tap into. Such additional borrowings will only be supported if the funds are used directly to help individual workers and businesses, particularly the hard-hit SMEs and tourism/hospitality sector.
The then Entrepreneur Development and Cooperatives Minister Wan Junaidi Tuanku Jaafar had reported that SMEs had suffered a total loss of RM40.7 billion last year. He said that some 580,000 businesses, representing 49% of the SME sector, are at risk of failing by October if they are not allowed to operate by then.
In other words, there is only one month left before the government must fully reopen the economy or else the SME sector will collapse. The nearly 1 million SMEs comprising 98.5% of all business establishments employ 7.3 million Malaysians in 2020, constituting 48.0 % of the national employment. Is a full reopening of the economy by October possible when the number of daily deaths and infections on 3 September remain high at 330 and 19,378 respectively for a cumulative 17,521 dead and 1,805,382 infections?
Further, the Department of Statistics Malaysia (DoSM) reported that businesses from all sectors in Malaysia are more pessimistic about their business conditions in the third quarter of 2021. In its latest Business Tendency Survey, DoSM noted that businesses’ confidence indicator had fallen to (-21.3) % in Q3 2021, as to (-3.1) % in Q2 2021. This is the second most pessimistic outlook since the (-25.1)% in the second quarter of 2020.
The direct high impact of the 3 months waiver of interest during the bank loan moratorium and additional RM45 billion fund injection would help to counteract the anticipated unfavourable business conditions in light of severe and prolonged Covid-19 pandemic. The government must loosen fiscal restraints as well as shift from the old economic orthodoxy, of financial band-aid with occasional “one-off” assistance, to the regular, periodic, and recurrent payments to pull the country out of this once in a lifetime economic recession.