PETALING JAYA, July 17: Economists have agreed with the call for an extension of the six-month moratorium on bank loans but say this should only be allowed for targeted groups such as low and middle-income earners.
Carmelo Ferlito, a senior fellow at the Institute for Democracy and Economic Affairs, said these were the groups most affected by the economic slump from the Covid-19 pandemic and subsequent lockdown.
“Low and middle-income earners who, in normal conditions, would have been able to honour their debts, find themselves in a situation of financial instability with the movement control order,” he told FMT.
“They are the ones we should help because they are the ones who would not have defaulted in normal conditions.”
Adding that extensions should be given on a case-by-case basis, he said the decision should be left to the banking institutions.
“Banks know their customers and who is really in need of the temporary support.”
The Malaysian Trades Union Congress (MTUC) yesterday urged Putrajaya to extend the moratorium for the B40 and M40 groups, saying the economy will need at least another six months to recover.
MTUC secretary-general J Solomon also urged Prime Minister Muhyiddin Yassin or Finance Minister Tengku Zafrul Aziz to state clearly whether or not the moratorium would be extended.
The moratorium, introduced on April 1, will end on Sept 30.
Economist Mohamad Nazari Ismail agreed that an extension should be given but said he understood why banks had so far refused to do so.
He said banks feared for their long-term cash flow and financial stability.
“Banks won’t extend because that would hurt their performance,” he said.
“They may also worry that debts will accumulate and become more problematic to resolve.”
However, he said banks were also responsible for creating a debt-for-profit industry that alleviated the people’s fear of debts.
“Banks have been making profits by encouraging people to take up personal loans and use credit cards,” he said.