KUALA LUMPUR, April 26 — Former finance minister Lim Guan Eng has now called for a RM5 billion seed money for his proposed price stabilisation fund, after the International Monetary Fund (IMF) warned of stagflationary risk in Asia.
He had previously called on the government to set aside RM3 billion for the said fund as a means to quell inflation and the hike in food and commodity prices, saying the situation could worsen as the war drags on between Russia and Ukraine.
In his statement today, the Bagan MP also reiterated his call for an extension of the loan moratorium and interest rate waiver for another six months.
“A RM5 billion seed fund should start off the price stabilisation fund not to arrest price rises, but to slow down the quantum of price rises. The higher cost of living extends to the rising cost of input materials for businesses and has imposed intolerable pressure on individual financial position to the extent that there were 5.3 million applications under the EPF special withdrawal facility to withdraw a total of RM40.1 billion of their own savings.
“Malaysia should heed the latest IMF’s warning yesterday that Asian nations face a stagflationary outlook, where in China the Covid-19 induced shutdown has slowed down growth coupled by the war in Ukraine, has consequently lowered growth prospects and caused higher inflation,” he said, adding that the World Bank too had lowered its gross domestic product (GDP) growth forecast for Malaysia for 2022 to 5.5 per cent, from 5.8 per cent previously.
Lim said that this is the lower end of the government’s 2022 forecast GDP of between 5.5 and 6.5 per cent, adding that rising prices had also led to a higher cost of living as food prices, including chicken and vegetables, spiked more than 10 per cent in March 2022.
He also warned that stagflation would affect employment prospects with lower pay and a higher cost of living.
“Inflation will be subjected to further pressure with higher imported inflation with the value of the ringgit declining to RM4.35 to the US dollar and a historic low of RM3.16 to the Singapore dollar. The time has come to check higher prices and generate higher growth by establishing a price stabilisation fund and an extension of the interest rate waiver and bank loan moratorium by another six months that ends on March 31, 2022,” he said.
Lim said that for this reason, the government should heed the requests from both individuals and business community, particularly small and medium enterprises (SMEs), for an extension of the interest rate waiver and bank loan moratorium.
He said that the benefit of the loan moratorium has provided relief to the value of at least RM80 billion and has benefited eight million individuals and companies.
He said that the banking industry can afford to absorb the cost of this measure, after recording a healthy pre-tax profits of RM41.5 billion in 2019, RM28.5 billion in 2020 and RM33.7 billion in 2021.
“Clearly, bearing the costs of the loan moratorium and the interest cost waiver has not affected the profitability of banks, However, much needed assistance and relief from the loan moratorium and interest rate waiver will help individuals and businesses, especially SMEs, to allow them to recover from Covid-19, overcome higher prices and slowing growth,” he added.
Earlier today, news agency AFP reported Anne-Marie Gulde-Wolf, the acting director of the IMF’s Asia and Pacific Department, as saying that the Asian region faces a stagflationary outlook, with growth being lower than previously expected and inflation being higher.
The report said that the regional outlook, which follows the World Economic Outlook released last week, shows that the growth forecast for Asia was cut to 4.9 per cent, which was impacted by the slowdown in China, causing ripple effects on other closely-linked economies.
AFP also reported Gulde-Wolf as saying that a larger-than-expected slowdown in China due to prolonged or more widespread Covid-19 lockdowns or a longer-than-expected slump in the property market presented “a significant risk for the region.”
She said Russia’s invasion of Ukraine and imposed sanctions on Moscow by Western nations had also increased food and fuel prices globally, while major central banks were raising interest rates to combat inflation, which would then pressure countries with high debt loads.