4pm 10th March year 2009 is a very much anticipated time for most people who called themselves Malaysian, especially those who are more alert and conscious towards the state of economy of our country.
At the stated time above, our Minister of Finance cum DPM is due to release the so called ‘Mini-Budget’. Mini-Budget is the tool that our country monetary policy makers and businesses lay their hope onto rescuing our contracting economy, given that the exporting index in the past month are in the red, and a very worrying magnitude of red.
After the BNM(Bank Negara Malaysia) took on its proactive approach to trim its Overnight Policy Rate(OPR) twice in as many months, to bring down this indicative figure to 2.0% last month, after it first exorcise the rate to 2.5% in January, much of the experts have voiced their feedback to acknowledge the farsighted ability of our central bank. But even bank Negara has trimmed its OPR to its lowest at 2.0%, the credit crunch that has infected even to our country has still not seen its easing effect which was desire, because this measurement has its lag effect, that is, it should take at least 3 to 4 months before the effect is realized and felt. But still, we could not rely on cutting our OPR rate to revive the economy, because by doing so would push our currency value to lower level, which means devaluating our currency, something we know too well that we should also take note of.
This is monetary policy in action. There is another way to save the economy and if this is done in conjunction with monetary policy action, it should be able to create a synergistic effect, ladies and gentleman; we are talking of fiscal stimulation, one like our mini-budget which is just 4 hours away from being made public as of writing time.
Fiscal stimulation is about injecting money into the market, in the hope that this newly injected capital would create the kind of storm to stimulate spending and to put it in a layman term, it means ‘putting money into people pocket’. In month November, our federal government has pumped in the tremendous amount of RM 7 billion (stop counting the number of 0 in a billion) into the market and hoped that this free money would be enough to stimulate spending and improve domestic demand (at least). Clear enough, this fiscal policy also has its lag effect as plans such as to build infrastructure, to create jobs etc need time to tailor into proper and effective plan before it is being executed. But with this policy decision, we should also take into consideration how would this money be put into people’s pockets, and into whose pockets.
This monstrous chunk of money that has been anticipated to make up for the mini-budget is reported to be at least RM 10 billion, much lower than the figure most economies expected and advised our minister of finance to come up if the sole purpose of this budget is to save and give hope to our people. RM 10 billion released into the market would nevertheless take few months time to implement its plans and hence the effect should also have to wait until it is felt.
This action would surely push our currency value higher to RM 3.8 level as well, it means a more expensive import prices and more lucrative incentives for businesses that export its goods to oversea; but only this time, the external demand is fading away.
I personally hope that our government would take full use of this mini-budget to offer hope to the people, not by putting money into everyone pockets, but to come up with planning that would leave our country stronger in our already strong fundamentals, and to implement more transparent policies, and to make the best use of this billions of free money which is about to be pumped into the market.
For example, if you were to inject money to create job and improve infrastructure, then it will be of the best interest of the people to see federal government put this money into healthcare, education sectors; or to build infrastructures that benefit people, but not to build memorial, pondok-pondok, or some open-air park with weird statue like the one build by the state government of Subang Jaya few years ago, only to get criticism everywhere and to be shut down due to near to zero visits by publics.
You need intelligent to think through a challenge and you certainly need wisdom to get through a crisis, like the one we are in now.
Mini-budget, I hope I somehow can benefit from you as well.
