KUALA LUMPUR – It is within the government’s fiscal capability to increase the wage subsidy from the current RM600 per employee and extend the programme by at least three months for all sectors.
While it may be at the expense of slightly poorer credit ratings, said Sunway University Business School economics Prof Yeah Kim Leng, the government should consider enhancing the programme.
He told The Vibes this will ensure employers are able to retain staff amid the movement control order (MCO), and is a better solution to addressing financial concerns among businesses and individuals than the proposed blanket loan moratorium.
At present, all employers in states under the MCO are eligible for a wage subsidy of RM600 per worker earning below RM4,000 per month, but it is limited to just a month.
Beyond this, only targeted sectors, namely tourism and retail, will enjoy the subsidy until March, as announced in Budget 2021.
“I think allocating more budget for an enhanced Wage Subsidy Programme will not be an issue, given that the government can incur a slightly higher deficit,” said Yeah.
“This can be financed through borrowing, and while our debt level will increase slightly, it will still remain manageable.
“There is certainly still fiscal space to give additional support via wage subsidies. Although there is a risk of a credit rating downgrade, it’s not much of an issue, as other countries are also facing a similar situation.”
He said the RM600 subsidy across the board for a period of one month, as announced by Prime Minister Tan Sri Muhyiddin Yassin on January 18 under the RM15 billion Malaysian Economic and Rakyat’s Protection Assistance Package (Permai), is very much inadequate.
“The programme needs to last a minimum of three months for all sectors. Additionally, the government should prepare for a possible extension of the programme for another quarter, if things don’t improve and the MCO is extended.”
He was commenting on calls by various quarters, including a group of 25 opposition MPs, for the government to extend the programme and increase the subsidy amount, as well as impose an automatic loan moratorium for six months.
Targeted moratorium ‘good enough’
Yeah said the current arrangement of extending the moratorium only for targeted groups is the way to go.
This will ensure banks are able to collect repayments from borrowers with good financial status, which can then be used for loan-loss provisions and reallocating new loans, he said.
“I think the current approach is good enough. As long as there is an avenue for those affected to apply for a moratorium, I think the current arrangement is sufficiently comprehensive.
“As it stands, the moratorium has been relaxed somewhat, and most of the applications have been approved.”
Under Budget 2021, a three-month loan moratorium will be automatically approved for the B40 group, as well as small and medium enterprises, while those in the M40 category will have to make a declaration before their applications are approved.
On arguments that granting a blanket moratorium will ensure more cash in hand for the public, which, in turn, could help stimulate the economy through spending, Yeah said this is not necessarily the case.
“We will never be able to ascertain the nature of their use. Some can end up in speculative investments, buying non-productive assets, or most likely saved up for future emergencies.” – The Vibes, January 29, 2021
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