Dilemma of conditional support for Budget 2021
By Syed Azwan Syed Ali
KUALA LUMPUR,. Concerns arise as certain quarters have placed conditional support for Budget 2021, which has to be approved to avoid greater risk to the economy and the country, especially in facing the COVID-19 pandemic.
The issue comes about as Barisan Nasional (BN) and the Opposition bloc made two recommendations, namely allowing a ‘one-off’ withdrawal of savings from Account 1 of the Employees Provident Fund (EPF) and the extension of loan moratoriums, besides questioning the revival of the Department of Special Affairs (JASA) with a large allocation under the Budget.
Political and economic analysts agree that the Supply Bill 2021, which is currently being debated in the Dewan Rakyat can still be amended by the government taking into account the views of all parties, not to mention the debate session itself is to provide the best proposal for government’s consideration.
Prof Dr Mohd Azizuddin Mohd Sani, a political analyst from Universiti Utara Malaysia (UUM) said having the lawmakers making recommendations during the debate on the Supply Bill was a common practice before the Budget was finally approved.
He is also confident that the recommendations would be considered by Perikatan Nasional (PN) government after receiving further input, especially from the parties directly involved, such as banks and the EPF.
“The Budget (Supply Bill) is ‘flexible’ and can be amended. I think this debate is normal… (referring to the recommendations on the EPF withdrawal and moratorium). On whether it is approved as a lump sum or in stages or extended, the Government needs to take into account the views of those involved and look at the impact on the economy.
“I do not think the recommendations will be rejected with the position the current Government is in, because the risk is greater if the Budget is not passed. If not everything, the government can at least accept some (of the recommendations),” he told Bernama.
During the debate session on the Supply Bill 2021 – which has the country’s largest allocation to date at RM322.5 billion – earlier this week, the government bloc through BN backbenchers’ chairman Datuk Seri Najib Tun Razak (BN-Pekan) pledged conditional support for the Budget.
The conditions, deemed popular among the public, include the demand to allow a ‘one-off’ withdrawal of up to RM10,000 from Account 1 of the EPF, and a six-month moratorium extension until June 2021.
Under the current Supply Bill 2021, the government is allowing the withdrawal of EPF savings from Account 1 of up to RM500 per month for a period of 12 months beginning in January. Some 600,000 EPF contributors affected by COVID-19, especially those who have lost their jobs, are expected to benefit from the initiative which would see a total withdrawal of up to RM4 billion.
However, there are some who feel that withdrawing RM500 a month would not be enough to meet the needs of the affected group, and neither would it significantly help those who have lost their jobs to start a new life.
Opposition leader Datuk Seri Anwar Ibrahim also raised the issue, urging the government to reconsider the RM500 withdrawals from EPF as it was deemed unreasonable for the B40 group, besides requesting the government to focus on extending the moratorium.
Emphasising the fact that the COVID-19 Fund represented only 5.3 per cent of the Budget’s total allocation, Anwar said Opposition MPs would only support the government’s budget if it was truly a ‘budget to help the people cope with the COVID-19 pandemic’.
MPs from both sides of the divide also seemed to be in agreement over the extension of the moratorium aimed at alleviating the burden of those affected by COVID-19.
An automatic moratorium extension of three to six months for those with loans of RM500,000 and below was also voiced by Datuk Seri Ahmad Maslan (BN-Pontian), and supported by MPs from the opposition bloc.
Meanwhile, Assoc Prof Dr Ahmed Razman Abdul Latiff, an economist from the Putra Business School (PBS) said he agreed with the proposed moratorium extension until June 2021 based on the capabilities of local financial institutions.
“The extension of the moratorium should not be limited to the B40 target group and micro-enterprises, and should also be extended to the affected SMEs (Small and Medium Enterprises) and M40 group,” he said.
However, he did not agree with one-off withdrawal from EPF, as he was worried about the financial management risk it would pose to the withdrawers.
“But I agree that the monthly withdrawal amount (from EPF savings) should be increased. If possible, it should be extended to the 4.3 million individuals who had previously applied for i-Lestari,” said Razman, stressing that the EPF withdrawal and moratorium extension should be done simultaneously to increase the monthly disposable income of the affected groups.
Razman also suggested that the government allow the EPF to increase its investments in foreign markets, particularly in high-return equity investments, to increase the income of the country’s retirement fund, if amendments were made to the Budget.
Both analysts also urged the government to take heed of calls to reconsider the proposed re-establishment of JASA with an allocation of RM85.5 million under the Budget.
“The government must really look at it. It needs to convince and explain to all parties, on what is the function of the department, and it may also need to reduce the total allocation (RM85.5 million) which is quite high in the current context,” said Razman, referring to the weak economic situation due to COVID-19.