KUALA LUMPUR, Aug 17 — Former finance minister Lim Guan Eng has urged the government to inject another RM45 billion as part of another round of economic stimulus package to prevent the country from going into a recession.
In a statement today, Lim said that while a further RM45 billion injection would widen the nation’s fiscal deficit to 9 per cent, but it is necessary to “save people’s lives by rescuing their businesses and jobs”.
“Another RM45 billion fund injection as an economic stimulus may cause our fiscal deficit to widen to 9 per cent of GDP but will allow Malaysia to quickly come out of the Covid-19 economic recession,” he said, referring to the gross domestic product.
“Malaysia’s GDP contraction of 17.1 per cent in the second quarter is the worst in Asean. An additional RM45 billion similar to the one in April is urgently needed to put our economy back on track to save businesses and jobs,” he said in a statement.
This comes after Bank Negara Malaysia’ recent data shows that Malaysia’s GDP contracted at a record rate of -17.1 per cent year-on-year for the second quarter of 2020.
In comparison, Lim stated that Thailand, which depended nearly twice more heavily on tourism than Malaysia, just announced a smaller than expected GDP second-quarter growth contraction of 12.2 per cent
“If the federal government continues to adopt a lackadaisical attitude that the economy will right itself, then we are in for a rude shock for the remainder of the year,” he said.
Moreover, Lim stated that a fiscal deficit of 9 per cent of the GDP is tolerable and it would not be the worse deficit on record pointing out that the lowest worst deficit to GDP was in 1982, at 16.6 per cent and in 1981, at 15.6 per cent of GDP.
Lim also stated that even government backbenchers are not convinced that the Perikatan Nasional administration is doing enough to mitigate the economic impact of Covid-19.
“Even government backbenchers are not convinced by the government’s political spin, because economic data shows the government has not been doing enough to mitigate the recession.
“Despite the RM45 billion fund injection, Bank Negara Malaysia’s data shows the government’s second-quarter operating expenditure fell 2.1 per cent from a year ago, compared to a 5.2 per cent increase in the first quarter.
“Further, the government can rely on borrowings from the domestic market as they have done for the initial RM45 billion fund injection. As at end-June 2020, the local bond market size was RM1.6 trillion (including government bond, corporate bond and BNM papers).
“A domestic RM45 billion debt issuance would be easily absorbed and digested,” he said.
