Cash is king in helping the poor, say experts

 

A monthly aid payment of RM500 will be given to those aged 60 and above with income below the poverty line.

PETALING JAYA: Cash is king when it comes to helping the poor and the government has the fiscal space to make this happen despite its rising debt.

This is according to two experts, who told FMT that Covid-19 aid measures such as loan moratoriums and tax incentives, while helpful for many, were not the most meaningful forms of assistance for Malaysia’s most vulnerable.

Zouhair Mohd Rosli, a researcher at DM Analytics who has worked closely with Unicef in conducting research into the country’s poorest communities, said it was clear from his conversations with members of the urban poor that direct cash aid was the top priority.

“When you ask them what they need, at least 80% will say they need money,” he said. “Only around 5% will say they want loan moratoriums” since lingering debt is less of an issue than getting by day to day.

Zouhair Mohd Rosli.

“It can’t just be a one-off like we have now with Bantuan Prihatin Rakyat, either. It needs to be consistent and regular.”

Zouhair said the first payment would need to be delivered immediately to help address their most pressing concerns, such as affording daily necessities and weathering job losses or pay cuts.

Such aid, he said, should be expanded to include people in the M40 group, like the Bantuan Prihatin Nasional aid of last year.

He also said wage subsidies should be more robust to protect the jobs of the poor.

Zouhair said the government needed to understand that people and businesses would face difficulties not only during the lockdown period, but beyond it as well.

Benedict Weerasena.

Benedict Weerasena, an economist with Bait Al-Amanah, agreed that direct cash injection was the best immediate strategy because “short-term cash transfers go a long way in alleviating vulnerable households during times of crisis”.

He said the aid should be targeted to ensure that the most vulnerable get maximum support.

Weerasena referred to the crisis as something that has provided the government an opportunity to look at broadening welfare reforms.

He said there was a need to focus on long-term strategies like job creation and improving socio-economic mobility.

“Malaysia needs long-term policies which empower the poor to be resilient and competitive through a graduation approach. This approach targets individuals living in poverty and assists them with basic resources, social support, technical training and financial education so that they are able to generate sustainable sources.”

Regarding how the government can afford these direct measures, Zouhair said spending should not be an issue because, even with the debt-to-GDP ratio at 58%, there was still about RM20 billion left for the government to borrow before reaching the debt ceiling.

“Even if we breach the 60% threshold, it isn’t the end. It can be adjusted if Parliament is reconvened,” he said.

“Borrowing more money to help the people makes more sense than trying to chase mega projects to boost the economy.

“What people need now is money. If people have money, they will spend. And that helps the economy, too.” - FMT