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By Azlee Nor Mahmud
KUALA LUMPUR, Oct 19 -- If an automatic moratorium is further extended, the economic recovery process will be more difficult to manage, said an economic analyst.
Bank Islam Malaysia Bhd chief economic analyst Dr Mohd Afzanizam Abdul Rashid said as economic recovery requires cash injection, when the banks are unable to channel funds to the business and household sectors at the right rate and time, the economic recovery process can be affected.
“Things like these will certainly affect the confidence of business operators, investors and the community which will ultimately be to the detriment of all parties.
"The fact is, the banking institution can be regarded as the heart in an economy that carries out the task of circulating blood throughout the body," he told Bernama here today.
He said if the moratorium was automatically granted continuously, it was feared that the banks would not be able to provide financing smoothly due to the low level of liquidity, as well as the declining capital level.
“This is because the revenue collection is likely to decrease as the moratorium as a whole is carried out for a longer period of time.
“Indeed, sufficient capital and high level of liquidity matter most for the banking institution in conducting their business. These two things will enable the banks to continue to provide financing to households and businesses which, in turn, will boost the country’s economic growth," he said.
Based on the Financial Stability Review report for the first half of 2020 released by Bank Negara Malaysia, the percentage of households who choose to continue the automatic moratorium decreased from 86.9 per cent in April to 85.5 per cent in May and 84.4 per cent in June.
"The latest data show that many borrowers have already chosen to repay their debts even though the moratorium period has not yet ended," he said.
“These kind of data clearly show that not all Malaysians need a moratorium. This is due to the fact that some Malaysians are not affected economically by the COVID-19 epidemic.
“Among the side effects of the moratorium is that the debt will be slower to be settled. Therefore, those who do not need a moratorium, of course, want to prevent this from happening," he said.
Hence, he said the impact and purpose of any measure to revive the economy must be studied first.
"Lastly, any form of assistance must meet the needs and target groups to avoid any waste of resources that are indeed limited," he said.
The full text of Mohd Afzanizam’s article can be found at Tinta Minda at https://www.bernama.com/bm/tintaminda/news.php?id=1891293