Najib as the new Finance Minister should be more forthcoming on our economy and how the Government proposes to insulate us against the tidal wave of economic bad news. the Malaysian economy is an open one and we need to take immediate remedial measures. The recent move to cut the helicopter deal does not fall into the category of fiscal action that will help. It merely postpones the development/capital expenditure to a later date!
This points out that commecial paper creation and trading, the life blood of trade and commerce, is shrinking. The same is true for bonds and other forms of credit creation. Our interest rates, though low enough, may need to be adjusted down as has happened with nearly all our neighbours.
Given the current situation where the private sector is not going to take the initiative, and with banks not giving the full credit support that the private sector needs to operate optimally, that leaves only fiscal policy measures to safeguard and insulate our economy.
All unnecessary expenditure must be immediately put on the backburner while the Govt embarks on direct pump priming that will not only have immediate impact but will result in longer term value adding to growth. This means public works and infrastructure.
Agriculture, especially food production, needs to be prioritised; SMEs need further tax incentives while the services sector also needs to be pushed. Fiscal policy measures do not just mean tax measures. I am sure the FM knows the range of tools under his direct control. That means he should not wait until next year to review the budget that was just revealed in Parliament. That Budget was premised on conditions that do not exist any more and are unlikely to return.
Boosting the stock market may be confidence building but it would be of more value if the brokers margin call are mitigated with bank support so that the market freefall can he slowed down. Secondly, revenues were premised on prices of commodities before the financial and economic breakdown of the West. We have to adjust our cloth to fit the new cut.
Monetary policy measures including direct intervention by BNM, like the Fed Reserve in new credit creation, may be necessary if the banks are afraid to lend money. as mentioned earlier, institutional investors are not accepting or renewing commercial paper take up nor bond issues. Banks may be holding back on loan drawdowns. BNM need to monitor this and ensure the economy's lifeblood, that is credit, does not suffer from blockage or seizure.