KUALA LUMPUR: To address the Covid-19 economic fallout which is expected to worsen in the coming months, Datuk Seri Najib Razak (BN-Pekan) has urged Bank Negara and banks in the country to reconsider its decision not to extend the loan moratorium.
The former premier expressed concern that many companies and borrowers may go bankrupt as they might not be able to pay their monthly instalments when the moratorium ends in September.
“We must realise that the main reason the banks want the instalment payments to continue, is to provide fresh loans to new customers.
“If demand for new loans has dipped, then there is no need for banks to force their customers to repay the principal payment, ” he said during his speech on the Royal Address in Parliament on Thursday (July 16).
The moratorium on loans, due to expire in September after a six-month period, was announced by the government last March as part of its plan to address the economic fallout caused by the Covid-19 pandemic.
The former premier said if the banks are not able to extend moratorium for interest and principal payments, then they should consider allowing its borrowers to repay only the interest rate in their respective monthly instalments, rather than the principal payment.
“On this matter, the government must be more stern and not bow down towards the demands of the banks, ” he said.
Najib said the government and government-related trust funds are among the biggest shareholders in local banks, while the entire banking industry falls under the purview of the government.
“We must understand that the government has tremendous powers on Malaysian banks, either in terms of share ownership, the injection of low-cost funds, guidelines and legislation concerning banks.
He said the banks have made tremendous profits in the past.
“As an example, if a bank usually earns RM5bil in the past and they only made RM1bil to RM2bil now, it will not cause the country’s financial system to collapse.
“That is why this is the time for banks to sacrifice so their customers are not affected and are able to return billions in profits to banks in the future when the Covid-19 crisis ends.
Najib said the government must accept the reality that not all businesses are receiving the same impact from Covid-19.
“The reality is that certain sectors would not recover fully as before, or they require a few more years to recover.
“Not all businesses can be saved, ” he added.
In times of low-investor confidence, Najib said the Perikatan Nasional government plays an important role to recover the economy as well as provide more important job openings.
Najib said this is the time for the government to simplify and speed up the approval process for any new investments or businesses for investors.
“If last time, we need 10 conditions to be fulfilled before being given the green light to operate, then the government should approve if five or six conditions are already fulfilled.
“Now is the time for the government to simplify and speed up the approval process. On this matter, the government can issue a conditional approval for new investors and companies, so they can start operations as soon as possible, ” he said.
He also said new businesses should be given more time to meet its unfulfilled terms, as he stressed that it is the government’s priority to encourage businesses to generate the economy and provide new jobs as soon as possible.
Meanwhile, Najib said the Perikatan government will need a bigger fiscal space to battle the economic impact brought by the Covid-19 pandemic, adding that this should not be raised by selling national stakes at times when asset values are low.
Najib also urged the government to immediately table a motion to increase the statutory debt limit of 55% to a higher rate.
This was because Malaysia’s debt ratio to its gross domestic product (GDP) has gone up to 54.4% during the first quarter of 2020.
“The Perikatan government needs bigger fiscal space to fight the Covid-19 economic impact without selling off national assets at a low price, ” he said.
During Pakatan Harapan’s 22 months of administration, Najib said Malaysia’s debt ratio to GDP has increased by 6%.
“This means that we nearly reach the statutory threshold of 55% as mentioned earlier, ” he said while quoting former premier Tun Dr Mahathir Mohamad as saying that Malaysia has RM2tril in savings.
“Although national assets are big, the Covid-19 period isn’t the right time to sell government assets and stakes, ” he added.