KUALA LUMPUR: Long-term and concrete measures to increase the levels of liquidity in the country’s economy are required to complement Bank Negara Malaysia’s decision to lower its Statutory Reserve Requirement (SRR) from 3.5 per cent to 3 per cent effective Nov 16.
Pas Central’s Economic, Real Estate and Entrepreneur Development Committee vice-chairman Mazli Noor said among the tangible measures that should be taken to complement the Central Bank’s decision and correct the current situation was encouraging the banking sector to increase its lending, particularly to retail and small and medium businesses (SMEs).
“This to facilitate the effective transfer and dissemination of the increased liquidity across a wider spectrum of the country’s economy, and avoid the liquidity trap,” it said in a statement today.
“This would also clearly reinforce the Central Bank’s recent decision to maintain the nation’s Overnight Policy Rate (OPR) at 3 per cent.
“Through it all, it remains crucial that consumers maintain careful and conscientious spending practices, with the private sector encouraged to support and where possible increase their investment.
“In turn, this would stimulate aggregate demand, Mazli said.
He said BNM must also consider contributing simultaneously to the nation’s development funds through strategic purchases of the government’s bonds.
“It is clear that to avoid the liquidity trap hanging over the country, such purchases must be extremely targeted and be conducted completely objectively, aimed at specific government agencies and developments.
“This to ensure that the funds are channeled wholly to high impact projects with maximum multiplier effects, he said.
“In the end, it comes down to ensuring the country’s increased well-being by implementing complementary measures that is able to ride on each other’s direction and stretch its benefits across a larger spectrum of the economy, as opposed to standalone measures by well-meaning but ultimately isolated institutions.”
Mazli said BNM’s latest decision was a reflection of the nation’s increasingly problematic and despairing economic environment.
“The rate was last lowered from four per cent to its current rate in 2016 to little effect, indicating that more concrete and long- term oriented steps are necessary to increase the levels of liquidity in the country’s economy.”