Kuala Lumpur: Reforms are crucial steps to transform Malaysia into a more resilient and vibrant economy capable of adapting to domestic and global challenges. Bank Muamalat Malaysia Bhd chief economist Dr. Mohd Afzanizam Abdul Rashid emphasized that while these reforms might result in higher prices in the short term, mitigation plans have been arranged.
According to BERNAMA News Agency, these plans include cash transfer programs such as Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA), along with early school assistance (BAP) to benefit students regardless of income level. Dr. Mohd Afzanizam mentioned that if the government successfully implements its reform agenda, it could significantly enhance its credibility in financial management, leading to favorable reviews from Credit Rating Agencies (CRAs).
Dr. Mohd Afzanizam believes that these mitigation plans will ensure support for targeted societal segments, allowing them to thrive during the transition. The reforms, which involve restructuring government finances, enhancing education and healthcare sectors, and attracting foreign investments, aim to create a competitive, inclusive, and equitable economy for future generations. Malaysia may witness an upgrade in its sovereign rating, currently at A-/A3/BBB+, if these reforms are consistently maintained and yield tangible results.
Furthermore, Dr. Mohd Afzanizam stated that these reforms are anticipated to attract more foreign investments, increasing the demand for financial assets such as equities and bonds. This could lead to a higher demand for the ringgit, potentially appreciating its value against the US dollar. The ultimate objective is to establish a more vibrant economy that benefits society overall. To achieve this, efficient management of government finances is crucial to eliminate waste and maximize reform impact.
Putra Business School’s Master of Business Administration program director and associate professor Ahmed Razman Abdul Latiff acknowledged the potential rise in the cost of living but noted that the increase might be insignificant due to the enhanced allocation for Sumbangan Tunai Rahmah, providing greater fiscal support for lower-income households. He stressed the necessity for monetary system reform to bolster and protect the ringgit, suggesting that Bank Negara Malaysia (BNM) could introduce a Central Bank Digital Currency (CBDC), a sovereign cryptocurrency based on blockchain technology.
Ahmed Razman proposed linking the CBDC to a basket of commodities to safeguard it from speculation and market sentiment, which currently affects the ringgit. He asserted that a stable CBDC could enhance the purchasing power of the rakyat. Additionally, he identified rising transportation, energy, and housing costs as critical issues needing immediate attention. These challenges can be effectively addressed by transitioning from a debt-based economy to an equity-based economy, which offers a more sustainable approach. To facilitate this transition, Ahmed Razman suggested exploring equity financing and other innovative financial mechanisms as alternatives to traditional debt financing.