By Afifah Suhaimi
Burdened by the increasing financial commitments, many Malaysians are found to be deeply in debt to sustain their lives while aiming for healthier financial status – to the point that some might spend their whole working lives paying off debts.
What’s more, with the Covid-19 pandemic going on, this problem is projected to deteriorate further, as the financial burdens faced by the rakyat are getting tougher – with many being laid off or experiencing pay cuts.
Nevertheless, many would have to take their hats off to the government for coming out with initiatives like PRIHATIN Rakyat Economic Stimulus Package, to preserve the welfare of its citizens, supporting businesses and strengthening the economy.
However, the initiatives provided to help the rakyat are only beneficial for short-term recovery, hence a bigger issue like high financial burden should be given priority.
A recent survey conducted by the Malaysia Financial Planning Council indicates about 59% of respondents had debt more than or equal to their assets. In addition, more than 50% saved less than 10% of their annual income, while 10% did not have monthly savings at all.
This is more likely because they may not have the opportunity to save after receiving their salary since most of them are used to cover their monthly expenses as well as being allocated for debt repayment.
It is also tragic to find that about half of the respondents did not have adequate or just enough money to satisfy their essential needs – due to the high cost of living.
Besides, according to a study by Unicef and the United Nations Populations Fund (UNFPA), households with the head of household who earned below RM2,000 per month tend to spend more on eggs and instant noodles relative to the other higher earnings group, and less protein and rice.
Obviously, this scenario happened due to the financial constraints faced by them as compared to the others. Owing to this, urgent and necessary actions need to be taken to ease their burden.
First, the government or private sector could invest in job creations with better pay, to support the affected Malaysians standing on their own feet, instead of only relying on the cash assistance from the government which, as we know, is a short-term solution and unsustainable.
While for the rakyat, with the consumers today starting to embrace online shopping, now is the best time than ever to be involved in e-commerce, to increase earnings.
Government then could help those who are interested by providing a financing aid that can be used to start up their online business.
Next, as a means to help the needy especially the B40 group to consume healthier foods, the government should introduce policies that make healthier food choices more attractive economically.
For instance, food prices must be subsidised through a mechanism that leads to lower retail prices so that consumers can purchase them at affordable rates.
Next, it is also vital for Malaysians to be able to manage their finances well so that they do not fall into the trap of debt.
To have this done, a proper education on the habit of savings and spending should be provided – to maintain an appropriate liquidity ratio with sufficient financial buffer and sustainable cash flow in case of emergencies.
While spending is useful to revive our economy, over-spending needs to be avoided, as this is the starting point for getting into debt – that is also associated with indicators of poverty.
Afifah Suhaimi is Research Assistant at EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research.