Extension of loan moratorium must be targeted at vulnerable groups

The extension should not be given in full as many businesses are already on the path to recovery, says MIDF MD


ANY plan by the government to extend the loan moratorium for another six months should be for targeted groups that are in dire need of debt relief rather than a blanket approval for all.

Malaysian Industrial Development Finance Bhd (MIDF) group MD Datuk Charon Wardini Mokhzani (picture) said the extension of the moratorium should not be given in full as many businesses are already on the path to recovery and would have the means to service their loans.

“I’m not sure if we should give another blanket approval. If there are certain businesses which require help or certain sectors which require assistance, I think we should target them. A blanket approval for another six months seems to be too much,” he said at MIDF’s webinar on “Surviving and Embracing Malaysia’s New Normal” yesterday.

Several quarters such as Malaysian Employers Federation and Malaysian Trades Union Congress including political leaders have called on the government to extend the loan repayment moratorium for another six months come October.

As of June 19, the estimated value of the moratorium of loan repayment was RM43.7 billion, of which RM15.3 billion was utilised by the business sector, while RM28.4 billion was utilised by the people via financing qualified for the moratorium.

“In six months’ time, let’s say half of the businesses can pay, that’s fine. The other half that can’t repay, some of them may just need a discount,” Charon added.

In a recent interview, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said it is up to the banks if they wish to extend the six-month loan moratorium, and that if the moratorium is extended, it should be done in a more targeted way.

Meanwhile, MIDF Research senior analyst Imran Yassin Md Yusof said the government has the room to raise its current debt-to-GDP ratio ceiling, but the move would be required to undergo a legislative process.

“Technically, we can go higher because the ceiling rate is self-imposed through an act. The government can change that through Parliament to increase it to 60% or 65%. It depends on the needs of the country presently,” he said.

On Tuesday, Tengku Zafrul touched on the country’s economic situations and suggested the Malaysian budget deficit is projected to increase to between 5.8% and 6%.

He reckoned the debt level — currently at 52% — may reach the statutory limit of 55% later this year due to the measures implemented under the Prihatin Rakyat economic stimulus package and short-term National Economic Recovery Plan (Penjana) aimed at saving lives and livelihoods, as well as stimulating the economy.

“Moving forward, the government is committed to fiscal discipline: To reduce the fiscal deficit to below 4% within the next three to four years.

“On our debt level, I have reiterated on many occasions that 97% to 98% of our debt consists of domestic borrowings.

“This is imperative as it means that our exposure to foreign-currency fluctuations is limited,” he said, adding the government’s commitment to fiscal discipline remains.

Tengku Zafrul had said the RM10 billion direct fiscal injection via Penjana is funded with the issues of Malaysian Government Securities and Malaysian Government Instrument Issues. He said Malaysia could afford the 55% debt-to-GDP ratio.