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What Type of Stimulus Were There?

Did the government provide everything in the ESPs?

Three consecutive governments have announced a total of RM 530 billion while rolling out nine economic stimulus packages (ESPs) since March 2020. This is around 35% of Malaysia’s 2022 real GDP.

Does this mean that the governments have really spent RM 530 billion alone for the ESPs?

Did the government provide everything in the ESPs?
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Nope, it doesn’t. And here’s why…

Economic stimulus can be provided in different ways. The programmes announced in the ESPs were not all direct expenditure. Some programmes were in the form of foregone revenue, because the government reduced taxes or fees, so that people and businesses pay less to the government. Other programmes could also be in the form of liquidity measures, e.g. through soft loans that the government offers to businesses. This would temporarily involve money being given to businesses, but which the government expected to be repaid eventually. A number of programmes did not even have direct impact on the treasury, since they were funded by the private sector or government ecosystem resources (read more here).

What kind of different stimulus measures were there?

There are five different economic stimulus measures. Payment deferrals made up the largest chunk of the ESPs (RM 223 billion), mainly in loan moratoriums and Program Bantuan Majikan COVID-19 (e-CAP). By theory, payment deferrals would not affect the profitability of the offering institutes, but it could result in short-term impacts on cash flows. This is followed by direct expenditures (RM 177 billion). Out of this amount, the total government expenditure announced was RM96.6 billion, which is 18% of the total allocation. The rest of the programmes were in forms of foregone revenues, liquidity measures, or loan guarantees by the government. Out of all these measures, direct expenditure and foregone revenue have a direct impact on the government budget by increasing spending or decreasing revenue. The other measures only indirectly impact the budget, in that the government would only need to spend if businesses that took loans or government guarantees end up defaulting.

Stimulus Measure

Examples

  • Wage Subsidy Programme
  • Bantuan Prihatin Nasional (BPN)
  • Free daily mobile data
  • Sales tax exemption for car purchase
  • PTPTN loan moratorium
  • Individual loan moratorium
  • Rental deferment for Program Perumahan Rakyat (PPR)
  • SME soft loan funds
  • PENJANA tourism sector financing
  • Danajamin
  • Rehabilitation Scheme for Bus and Taxi hire-purchase
Stimulus Measure
Examples
Direct Expenditure
  • Wage Subsidy Programme
  • Bantuan Prihatin Nasional (BPN)
Foregone Revenue
  • Free daily mobile data
  • Sales tax exemption for car purchase
Payment Deferral
  • PTPTN loan moratorium
  • Individual loan moratorium
  • Rental deferment for Program Perumahan Rakyat (PPR)
Liquidity Measures
  • SME soft loan funds
  • PENJANA tourism sector financing
Loan Guarantees
  • Danajamin
  • Rehabilitation Scheme for Bus and Taxi hire-purchase

All types of stimulus at a glance

Some facts…

  • A loan guarantee does not have an immediate impact on the budget, but it is a source of fiscal risk. Once the debtor fails to pay back, the guarantor (in the case of ESPs, this means the government) is obliged to service the guaranteed loan. 
  • Programmes like EPF minimum contribution rate reduction and SME soft loan funds provided more liquidity to the business sector to cushion the impact of the COVID-19 lockdown on businesses. Such programmes leave only temporary impact on the funding sources’ budgets and short-term cash flows given the loans are repaid in future. But, similar to loan guarantees, giving out loans poses a risk for the funding sources as the debtors might default.
  • Foregone revenues formed the smallest portion of the ESPs, but this is because the government did not provide estimates of the foregone revenue for many programmes. 

Learn more about the ESPs now!

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