By Afifah Suhaimi
BURDENED by the increasing financial commitments, many Malaysians are found to be deeply in debt to sustain their lives, to the point that some might spend their whole working lives paying off debts.
With the Covid-19 pandemic going on, this problem is projected to deteriorate further as financial burdens faced by the rakyat are getting tougher – with many being laid off or experiencing pay cuts.
Nevertheless, hats off to the government for coming out with initiatives like PRIHATIN Rakyat Economic Stimulus Package, to preserve the welfare of its citizens, support businesses and strengthen the economy.
However, such initiatives are only beneficial for short-term recovery, hence a long-term solution to ease 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, while more than 50% saved less than 10% of their annual income, and 10% did not have monthly savings at all.
This is more likely because they may not have the opportunity to save as most of their disposable income are used to cover 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.
According to a study by Unicef and the United Nations Populations Fund (UNFPA), households with heads who earned below RM2,000 per month, tend to spend more on eggs and instant noodles compared to the higher earnings group, and spent less on protein and rice.
Obviously, this scenario is due to the financial constraints faced by them as compared to the higher earning group. Owing to this, urgent and necessary actions need to be taken to ease their burden.
The government or private sector could invest in job creations with better pay to support the affected Malaysians who are fending for themselves instead of solely relying on cash assistance from the government which, as we know, is a short-term solution and unsustainable.
As for the rakyat, getting involved in e-commerce could be a means to increase their income, especially now, where consumers are starting to embrace online shopping. The government then could help those who are interested by providing financial aid to start up their online businesses.
The government should also introduce policies that make healthier food choices more attractive economically to help the needy especially the B40 group, to consume healthier foods.
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.
Apart from that, it is also vital for Malaysians to be able to manage their finances well so that they do not fall into the debt trap.
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.