Cash aid better than interest waivers, say economists

Cash aid will allow vulnerable groups to address their specific needs, says economist Geoffrey Williams.

PETALING JAYA: As the economy reopens, direct cash assistance will be the most appropriate form of government stimulus to allow the people to capitalise on eased restrictions, economists say.

The cash handouts would give people the liquidity they need to spend, generating business and revenue for firms that have endured months of slowed cash flow.

Juita Mohamad, an Indo-Pacific Fellow at the Perth USAsia Centre, said targeted assistance would be more effective than interest waivers or artificially reducing borrowing costs.

Juita Mohamad.

“Targeted cash transfers to vulnerable groups are a great way to provide liquidity to households, but the groups and the amount given need to be carefully assessed to ensure the programme’s effectiveness.

“If the waiving of interest during the moratorium is intended to help vulnerable households, targeted assistance for these households is more effective instead of disrupting the health of banks in the short and medium-term, impacting their income and inevitably impacting dividends for investors from different household groups.”

Geoffrey Williams of the Malaysia University of Science and Technology said a cash stimulus would allow affected Malaysians to choose how to address their specific needs.

Geoffrey Williams.

“Everybody hurts in different ways because of this crisis and so people should be given direct cash assistance to spend on the pain points they are experiencing in their own lives.

“The government should just give RM1,500 per month to each B40 and M40 household directly and let them fix their balance sheets as they choose.

“If they need to repay loans, let them do it. If they need to pay bills and rent, let them do it. If they want to rebuild their savings, let them do it.”- FMT