KUALA LUMPUR: The government can tap into its National Trust Fund, or Kumpulan Wang Amanah Negara (KWAN), if it needs additional fund to weather the Covid-19 pandemic.
Economists said the recently-announced RM20 billion of economic stimulus may gradually increase, depending on the severity of the pandemic impact.
They expect a few billions more to be allocated to ensure the people’s livelihood would not be severely affected due to loss of jobs and companies going bankrupt.
Socioeconomic Research Centre executive director Lee Heng Guie said the government had to borrow either through direct or off-balance funding, despite the accumulation of debt and liabilities.
He said Malaysia’s natural resource fund namely KWAN can be used to address the economic risks associated with the outbreak.
Established in 1988, KWAN conserves the country’s wealth from oil and other natural resources for future generations.
It is currently managed by Bank Negara Malaysia and its assets stood at RM16.9 billion as at end-2017.
“Malaysia has been running unbroken 23 years of deficit since 1998, as the government has been drawn down its realisable assets accumulated and borrowed largely from domestic sources to finance its development expenditure,” Lee told the New Straits Times (NST) today.
During the period of severe economic downturn in 2008-2009 global financial crisi, he said Malaysia’s budget deficit was higher at 6.7 per cent of gross domestic product (GDP) in 2009.
This resulted from the rolled out of a whopping RM67 billion fiscal stimulus package in 2009 to mitigate the deep global recession on the domestic economy.
Putra Business School business development manager Associate Professor Dr Ahmed Razman Abdul Latiff said additional borrowing can be made as there would still be a room, while imposing additional taxes on the people should be the last resort.
“The government will likely introduce incremental support measures from time to time to the existing fiscal stimulus package when the need arises,” he told the NST.
According to reports, the Iranian government had sought about US$5 billion loans from the International Monetary Fund, while the United States launched a US$700 billion quantitative easing programme to save its economy from the effects of the lethal virus.
Prime Minister Tan Sri Muhyiddin Yassin yesterday declared that Malaysia would be placed under movement restriction order from March 18 to March 31, 2020, to combat the spread of the virus.
Ahmed Razman said the declaration was the best option for the government to curb the overall negative impact to the local economy.
This could also prevent disruption in economic activities in the second-quarter of 2020 if the infection rate could not be contained.
“Although the drastic measure will hamper business activities locally, particularly in the first-quarter of 2020, I believe local business community accepted this willingly as this could be the most effective measure to combat the outbreak,” he added.
Ahmed Razman said the government should provide additional assistances to affected businesses if they were severely affected by the temporary restriction.
Lee said the government through the Economic Action Council would constantly track the implementation and outcome of the stimulus package.
“I believe the government will review and enhance the scope and size of the stimulus or second wave of the stimulus package if needed but within its balance sheets and implementation capacity,”
He said the top government’s priority was to mitigate and contain the spreading of the virus as public health safety was utmost importance.
“It is inevitable to expect inconveniences to public and business disruptions during this critical period, which would result in a slowdown in economic and business activities.
“While a partial lockdown might be unpopular with the people, especially the business community, drastic times call for drastic measures as a runaway pandemic, the economic consequences will be more damaging,” he added.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the restricted movement was a bold move.
“Even though it could have an impact on the economy in the immediate term as economic activities would not operate normally, we believe there would be a pent up demand once the virus is contained,” he told NST today.
He concurred that a second stimulus package could be building up and woud make sense in view of the severity to the global economy.
“We could see the latest data from China has been very dismal. China’s fixed asset investment plunged to 24.5 per cent year-on-year in January and February.
“Similarly, the JP Morgan Composite Global Purchasing Managers' Index has gone down to 46.1 points in February from 52.2 points,” he said, adding that the price war between Saudi Arabia and Russia had led Brent crude to decline significantly as well as the free fall in global equity prices.