A veteran economist has raised concerns over the government’s latest decision to allow for another round of RM10,000 withdrawals from the Employees’ Provident Fund (EPF), saying it could be counterproductive for the economy and the country’s future.
“The announcement will be received with mixed feelings. While those in need can now enjoy some relief, policy and budget planners will be concerned about the implications on the economy and public finance,” said Tan Sri Ramon Navaratnam.
“While the government is caught in a bind, we cannot continue going on this way, otherwise we will have to borrow more, and the economy may not be able to take it. Recent government spending has also given rise to concerns about prudent budget management,” he added.
The government recently spent close to RM100 million on the just-concluded Johor polls, had allocated RM10 million to the FA of Malaysia in January, and spent RM13.97 million on the Aspirasi Keluarga Malaysia programme held last December.
This afternoon, Prime Minister Datuk Seri Ismail Sabri Yaakob (pic) announced that EPF members could withdraw up to RM10,000 of their EPF savings to cushion the impact from job losses and the spiralling cost of living brought on by the various lockdowns due to the Covid-19 pandemic. Details of the scheme will be announced by the Finance Ministry.
Ismail Sabri said the decision to allow the special withdrawal was made following requests from various quarters. Hardest hit by the pandemic were those in the M40 (middle-income) segment. Estimates are that over half a million M40 households have slipped to the bottom 40 per cent (B40) category, as a result of Covid-19.
On Tuesday, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said in the Dewan Rakyat that if another RM10,000 withdrawal is allowed, then the EPF would have to dispose of more overseas investments and halt domestic investments in the short to medium term.
He said if the one-off withdrawal of RM10,000 is allowed, the number of members eligible to make such withdrawals would be around 6.3 million. This comes up to a total of RM63 billion.
Tengku Zafrul also said that the 2021 EPF dividend rate should have been higher, at 6.7 per cent, compared with the 6.1 per cent announced recently – had there been no outflow of savings by its members through earlier withdrawal schemes.
Following the Covid-19 pandemic, which began two years ago, the government had allowed for EPF withdrawals through three schemes – i-Lestari, i-Sinar and i-Citra – involving some 7.34 EPF members. The total amount of withdrawals added up to a colossal RM101 billion.
Navaratnam, a former deputy secretary-general of the Treasury, cautioned that proper vetting and the setting of a ceiling for those who qualified for the RM10,000 withdrawals, must be set.
“Perhaps it should only be made available to the poor … those earning RM1,000 and below. It should not be a situation of people making withdrawals today, and throwing a kenduri the next day,” he said.
“Right now, the burden is being shifted to the EPF. We must not look for short-term gain and long-term loss… While this may be a political move to make some quarters happy, it can be counterproductive, as far as the economy and the future is concerned.”
