Cash flows: Members lining up at the entrance to the EPF office in Petaling Jaya. — ART CHEN/The Star
PETALING JAYA: Another special Employees Provident Fund (EPF) withdrawal will only lead to soaring inflation in Malaysia, say experts.
While cash handouts may be an appealing option for politicians, the increased money supply could worsen inflation figures, said economist Carmelo Ferlito.
“People will have the illusion of having more money in their hands but the actual value of the money will be compromised.
“You do not fix broken eggs, and you certainly do not fix broken eggs by breaking more eggs.
“They (government) should have thought about this when they introduced lockdowns and increased the money supply by nearly 28%,” said Carmelo, who is CEO of the Centre for Market Education (CME), a think tank that promotes the concept of free markets.
Carmelo said there was an increase of 27.7% in the money supply at the end of last year compared with 2019.
He said he was also concerned over calls for a second RM10,000 EPF withdrawal.
“I’m afraid that those who are most in need of cash may have very little left in their EPF account.
“A new withdrawal will compromise the members’ financial stability, long-term resources and create more inflation by injecting money into the system,” added Carmelo.
Federation of Malaysian Consumer Associations (Fomca) deputy president Mohd Yusof Abdul Rahman said the government should not allow another round of EPF withdrawals as it is meant to be retirement savings.
“Many who were not facing any financial problem also made the RM10,000 withdrawals in the first round.
“This means the plan did not achieve its mission to help those in need,” he said.
Mohd Yusof added that those who made the withdrawals would have lower dividends when they retire.
Instead, Mohd Yusof said the government should find a better mechanism to help those in the lower income group.
“Perhaps the government can come up with a targeted scheme for the below 40 income group (B40),” he said.
Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said Putrajaya has to find a balance between helping those in hardship and also helping EPF members rebuild their retirement savings after the earlier withdrawals.
Mohd Afzanizam said assistance can come in many forms.
“Some may be in the form of subsidies and price controls, and some could be associated with capacity building such as education and training.
“It’s about gathering all the relevant data so we don’t miss out and prescribe a policy based on piecemeal data,” he added.
There have been growing calls on social media and several dubious news portals to allow for another RM10,000 withdrawal from EPF, purportedly to combat the rising cost of living and inflation.
However, Umno Youth chief Datuk Dr Asyraf Wajdi Dusuki has dismissed the calls, saying another special EPF withdrawal was not an option.
Asyraf said that while he was among those who called for the earlier EPF special withdrawal, a more holistic approach was now needed.
Since the Covid-19 pandemic began in 2020, Putrajaya has announced three special EPF withdrawal schemes – i-Lestari, i-Sinar, and i-Citra – with a total of RM101bil withdrawn.
In March, another RM10,000 special withdrawal was allowed.
