Hand out cash aid with extended lockdown, say economists

 

An economist is suggesting that RM1,500 be given to each B40 family as direct cash transfer as the days of moratoriums and special interest packages are over.

PETALING JAYA: With the lockdown extended by two weeks, the government needs to hand out larger amounts of cash aid to the B40 and M40 groups, say economists.

Geoffrey Williams of Malaysian University of Science and Technology, and Yeah Kim Leng of Sunway University both agree on this, with Williams calling for RM1,500 to be given to each household in the B40 and M40.

He projected that this would cost the government a total of RM60 billion.

“The RM60 billion could be transferred in part from the wage subsidy programme and can be phased out if things improve.

Geoffrey Williams.

“I really think we are past Plan B options such as loan moratorium extensions or more special interest packages. It really is time now for direct cash transfers,” he told FMT.

Williams also predicted that the two-week extension of the lockdown would cost the economy some RM7.2 billion, or around 0.5% of the nation’s gross domestic product (GDP).

Yeah said the least Putrajaya would be expected to do is to ramp up wage subsidies and other assistance, especially for small and medium enterprises (SMEs) in sectors deemed non-essential.

He told FMT that those who work in the informal sector and are self-employed would also need more aid simply to survive the prolonged lockdown. This includes small traders, taxi drivers and daily wage earners.

“Firms of all sizes would welcome easy access to soft loans and opt-in loan moratorium for businesses that are not allowed to operate for the extended period,” he said.

Both economists called on the government to come up with a clearer exit strategy for businesses, as firms need to optimise their finances while Putrajaya should avoid repeated reopenings and lockdowns.

Yeah Kim Leng.

Yeah said preemptive guidance on the expected duration of the lockdown would help businesses plan their finances and operations to minimise losses.

Williams said a new strategy was needed instead of lockdowns as it “simply does not work despite its massive impact on the economy”.

“We really need to decouple the management of the virus from the management of the economy. We are not controlling the virus by closing the economy,” he said.

The economists said the Pemerkasa Plus package announced by Prime Minister Muhyiddin Yassin on May 31 will need to be enhanced to keep businesses afloat and prevent retrenchments.

Williams said the RM40 billion aid package was not even close to being enough, especially since it involved only RM5 billion in direct fiscal injection by the government.

“The balance of the RM100 billion (allocated under the 2021 budget) often referred to by finance minister Tengku Zafrul Aziz was already planned for a recovery phase. It does not factor in the full lockdown and MCO 3.0 extensions,” he said. - FMT