As criticism mounts against new stimulus, former minister lauds attempt to keep deficit low

Syed Jaymal Zahiid
Tan Sri Wahid Omar calls the new stimulus prudent and ‘appropriate’ despite mounting criticism that most stakeholders will not benefit from it. — File pic

KUALA LUMPUR, March 28 ― Former minister Tan Sri Wahid Omar lauded today the fresh round of stimulus unveiled by the Muhyiddin administration, calling it prudent and “appropriate” despite mounting criticism that most stakeholders will not benefit from it.

Economists, business groups and political rivals have drawn attention to the fact that only RM25 billion from the RM250 billion “Prihatin” package would be injected directly into the economy, while the rest comes in the form of loan moratoriums, tax waiver, and guarantees.

But Wahid, who led the team of economic advisers for the Najib government, said spending RM25 billion alone would push the fiscal deficit up to 6.2 per cent, increasing the risk of a rating downgrade.

“With this additional RM25 billion, the fiscal deficit will rise to RM99 billion or 6.2 per cent of gross domestic product,” he said in a statement.

“I am made to understand that several measures have been undertaken to increase revenue and reduce operating costs so that the fiscal deficit can be reduced to just RM74 billion or 4.6 percent of GDP.”

Wahid’s defence of the package comes amid widespread criticism over what detractors see as a conservative fiscal response to the unprecedented scale of the Covid-19 crisis.

Several economists have accused the government led by Prime Minister Tan Sri Muhyiddin Yassin as seemingly more interested in keeping a balanced budget instead of helping the people.

In an immediate response to the stimulus unveiled yesterday, they said up to RM200 billion from the package are in the form of credit, guarantees and loans, and not in direct assistance, which is critically needed at this juncture of the crisis.

But Wahid argued this is standard practice.

“Next to direct fiscal injection, any government must galvanise funds from various sources to stimulate the economy,” he said.

“This includes funds from government agencies, government-linked companies, and the private sector. Moreover, two-thirds of the economy is now driven by the private sector.”

Critics from the Pakatan Harapan coalition had also employed similar methods when they were the government, the former minister added.

In the first round of stimulus announced by then prime minister Tun Dr Mahathir Mohamad, Wahid opined that direct cash injection amounted to only RM3.5 billion, far less than what the Muhyiddin administration had unveiled.

“The rest are from sources outside the (federal) budget which was RM10 billion in EPF contribution reduction, RM3.5 billion in loans from Bank Negara Malaysia, Bank Simpanan Nasional and other agencies and RM3 billion from other sources,” he said.

Others have lauded the RM250 billion stimulus package as “touching the hearts of Malaysians” who have been struggling to cope with the Covid-19 pandemic.

Lower and middle-income households were key targets under the package, and will receive up to RM5,000 in direct cumulated aid in the form of cash assistance and allowances.

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