Reforms Are Crucial To Build A More Resilient Economy - Economists

By Siti Noor Afera Abu

KUALA LUMPUR, Jan 14 (Bernama) -- Reforms are crucial steps to transform Malaysia into a more resilient and vibrant economy capable of adapting to domestic and global challenges.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said while these reforms may lead to higher prices over the short term, mitigation plans are in place.

This would be executed via cash transfer programmes such as Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA), early school assistance (BAP), which would benefit students, regardless of income level.

"Should the government deliver the reform agenda, it would greatly improve their credibility in managing their finances. This would translate into positive reviews from the Credit Rating Agencies (CRAs)," he told Bernama.

Mohd Afzanizam believes these mitigation plans will also ensure that targeted segments of society are supported and can thrive during this transition period.

The restructuring of government finances, the strengthening of key sectors such as education and healthcare, and attracting foreign investments are reforms aimed at creating an economy that is more competitive, inclusive, and equitable for future generations, he said.

Malaysia could see an upgrade in its sovereign rating, currently at A-/A3/BBB+, if reforms remain consistent and their results tangible.

Furthermore, he said these reforms are expected to attract more foreign investments, with investors purchasing more financial assets such as equities and bonds.

“This would create higher demand for the ringgit, which could lead to its appreciation against the US dollar. Ultimately, the goal is to build a more vibrant economy that benefits society as a whole.

“To achieve this, the government must ensure that its finances are efficiently managed to eliminate waste and maximise the impact of reforms,” he explained.

Putra Business School's Master of Business Administration programme director and associate professor Ahmed Razman Abdul Latiff said although the cost of living is expected to rise, the increase may be insignificant.

He also noted that the allocation for Sumbangan Tunai Rahmah has been increased, resulting in greater fiscal support for lower-income households.

However, he emphasised the need for monetary system reform, particularly to strengthen and protect the ringgit. 

One potential approach could involve Bank Negara Malaysia (BNM) introducing a Central Bank Digital Currency (CBDC), a sovereign cryptocurrency based on blockchain technology.

Linking the CBDC to a basket of commodities could shield it from speculation and market sentiment, which currently affects the ringgit.

"A stable CBDC could enhance the rakyat's purchasing power," he said.

Ahmed Razman said rising transportation, energy, and housing costs are critical issues that require immediate attention.

These challenges can only be effectively addressed by shifting from a debt-based economy to an equity-based economy, which offers a more sustainable approach.

To achieve this transition, he proposed exploring alternatives such as equity financing and other innovative financial mechanisms to replace traditional debt financing.

-- BERNAMA