KUALA LUMPUR – The government has been urged not to reintroduce a blanket loan moratorium – as was done from April to September – in the upcoming Budget 2021.
Such a move will only put a strain on banking institutions, while not necessarily stimulating consumer spending and the economy, said experts.
Institute for Democracy and Economic Affairs CEO Tricia Yeoh said should there be plans to extend the moratorium, it should be done in a targeted manner, as is being practised currently.
This is in reference to the three-month targeted moratorium for individuals who have lost their jobs or had their salaries cut, and businesses directly affected by the Covid-19 pandemic.
By going down this route, said Yeoh, the government will also be able to properly identify households and individuals most in need and at high risk of falling into poverty.
“This data can then be used for other social welfare programmes,” she told a webinar, titled “Budget 2021: Powering Through a Pandemic”, conducted by The Vibes yesterday.
“This is opposed to implementing a blanket loan moratorium. For one, it is very difficult to determine if an individual will eventually have non-performing loans at the end of the moratorium period, and hence, require the assistance.
“Also, if someone did have extra cash in hand, would that affect their spending? It is a false assumption that the more you have in the bank, the more you will spend.”
She added that reintroducing a blanket moratorium will only put pressure on the government to extend the policy in the future, for as long as the pandemic is not addressed.
She was asked to comment on calls by various quarters for Putrajaya to include this policy in the Budget to be tabled tomorrow, seeing the stressed financial situation of many Malaysians presently.
Echoing Yeoh’s sentiment, Research for Social Advancement visiting researcher Farhana Roslan said the targeted moratorium should have been the government’s approach from the start of the virus crisis.
She said this is the middle ground for banks and the people, adding that a blanket moratorium will only hurt investor confidence.
“The sheer impact on the banking system is huge. When people are not paying their loans, banks won’t receive revenue. There are bound to be long-term repercussions.
“Investor confidence can also be tarnished seeing the government’s ability to stop collecting its own revenue... It should never have been a blanket moratorium.” – The Vibes, November 5, 2020
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