‘Incompatible monetary policies’
(NST) – Prime Minister Datuk Seri Anwar Ibrahim’s remarks about adjusting Malaysia’s interest rate without burdening SMEs and at the same time preventing foreign funds outflow has been labelled as “rhetorics” by some economists.
They said there could be other measures to demonstrate that the government is committed to protecting and promoting the economy. One of them could be to speed up the 2023 Budget allocation.
Singapore Institute of International Affairs senior fellow Dr Oh Ei Sun said Anwar’s plans to strike a balance between ensuring that the interest rate would not burden SMEs and preventing funds outflow are “two incompatible monetary policies”.
“There could be subsidised loans for SMEs, but the government is short of cash itself. The government could also reenact capital control, but it would scare off foreign investors. So ultimately, I think what Anwar said remains rhetorical,” Oh told the New Straits Times today.
The Prime Minister, during his Negri Sembilan leg of the “Temu Anwar” programme on Saturday, signalled that Malaysia might adjust its key interest rate to curb the down trend of the ringgit against the US dollar.
Anwar, who is also the Finance Minister, said the government was in the process of striking a balance between ensuring that the interest rate would not burden SMEs and preventing the outflow of cash by investors to other countries.
Bank Muamalat Malaysia chief economist Mohd Afzanizam Abdul Rashid said the country’s key interest rate is pretty aligned with the state of monetary policy by Bank Negara Malaysia.
“Bank Negara continues to maintain its accommodating stance although the state of accommodativeness has been reduced as reflected by the 125 basis points hike in Overnight Policy Rate since March last year.
“In a nutshell, I think the monetary system has done its part to balance between achieving price stability and sustainable economic growth.”
He said that is a plus point since the central bank has exhibited its credibility to control inflation, which has slowed from 4.7 per cent in August last year to 2.8 per cent in May 2023.
“Perhaps there could be other measures to demonstrate that the government is committed to promoting growth and that could be speeding up the 2023 Budget allocation.”
He added that access to credit among SMEs and households is “business as usual” and the banks are well capitalised as well as highly liquid to channel funds to the existing and potential borrowers.
Gerakan Ekonomi Malaysia president Armin Baniaz Pahamin said the non-governmental organisation is against increasing interest rate in favour of business survivability and the people’s welfare.
“Increasing interest rate is the most common economic theory to prevent the ringgit from depreciating. But it will not only affect the SMEs but also almost every citizen with loans to pay.
“A more challenging task to manage the economy without burdening the industries and public at large is via a less conventional method such as a fixed currency control or to focus and aggressively export our products.
“With a weak currency, our exports will be very attractive. An exponential increase in export will be able to control the fluctuation of our currency,” Armin said.