KUALA LUMPUR, Aug 24 — The Temporary Measures for Government Financing Coronavirus Disease 2019 (Covid-19) Bill 2020 was passed at the policy stage in the Dewan Rakyat today following a debate.
Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said the country’s economic stimulus package implemented was derived from domestic loans as the country has a sufficient level of financial liquidity of around RM146 billion, thus lowering the risk of foreign exchange.
“Currently, the government will use domestic financial instruments as it can reduce foreign exchange risk exposures, as well as refinancing risks,” he said when winding-up debate for the Ministry of Finance on the Bill today.
Tengku Zafrul said any issuance of international bonds or sukuk should have strategic objectives, especially in developing the global sukuk market, as well as creating new benchmarks as a measure and reference for the issuance of private sector securities for international investors.
“Bank Negara Malaysia (BNM) also announced a reduction in the Statutory Reserve Requirement (SRR) ratio of 100 basis points to two per cent in March 2020, as well as additional SRR flexibility given to Principal Dealers by recognising MGS and MGII as part of SRR compliance.
“This move has added liquidity worth about RM30 billion to the banking system and it is part of BNM’s ongoing efforts to ensure that liquidity is sufficient to support financial intermediation activities,” he said.
He said BNM had also lowered the Overnight Policy Rate (OPR) by 125 basis points from 3.00 per cent to 1.75 per cent, the lowest level since 2004.
“The subsequent reduction of the OPR aims primarily to support the improvement of economic activities, as well as provide additional policy stimulus to accelerate the rate of economic recovery,” he said.
Compared to other countries, Tengku Zafrul said Malaysia’s stimulus assistance was more than 10 per cent of gross domestic product (GDP) and not 3.0 per cent as claimed.
“The stimulus assistance of other countries also take into account the contribution of the entire ecosystem. These include government guarantees, the resources of banking institutions, and their respective tax incentives.
“Therefore, the comparison was less accurate… not an apple-to-apple comparison and has caused confusion,” he said.
He asserted that the tabling of the Bill only involved a direct fiscal injection of RM45 billion as it was a sum of money that will be spent from the Consolidated Fund.
Of the RM45 billion additional money obtained for the stimulus package, RM30.608 billion has been disbursed, with the wage subsidy programme taking the largest fraction.
“However, we must remember that the overall stimulus introduced by the government is RM295 billion, or almost 20 per cent of GDP.
“Of this amount, RM145 billion is an injection from various sources such as financing from Bank Negara’s initiatives, government-linked companies (GLCs) and government agencies,” he said.
Tengku Zafrul said that if there was a need for additional fiscal injections, the government was ready to increase the amount of stimulus.
On moratorium, Tengku Zafrul said most banks have started accepting applications for moratorium extension and targeted bank assistance from August 7.
“In this challenging time, the banks’ ability to provide adequate buffers is very important to enable them to absorb the possibility of higher non-performing loans.
“Thus, this targeted assistance ensures that efforts continue to be focused for the benefit of borrowers who are really affected. This is also to ensure that banks continue to be able to lend to households and businesses to support the economic recovery,” he said.
A total of 43,560 applications were received from individual borrowers and 22,266 of them were approved. For the remaining 21,294 applications, the banks are awaiting confirmation from the borrowers on the assistance offered.
Encouraging development is also seen for micro and small and medium enterprise (SME) entreprenuers. A total of 3,325 applications were received and 2,465 of them were approved. — Bernama