Letter to Editor
RECENTLY the Overnight Policy Rate (OPR) was raised by 25 basis points to 3%. This is in addition to the hikes in 2022 by the previous government where it was raised four times by a cumulative 100 basis points from 1.75% to 2.75%.
Indeed, the latest hike has sent shockwaves among those in the B40 and M40 groups and the tremors will probably be felt for a long time.
In that context it must have been somewhat perplexing to many when our Economy Minister Rafizi Ramli had reportedly said that only those who have home loans are affected by the OPR hike and that not all people have a home loan now.
So, is he saying that businesses with overdrafts and term loans facilities where pricing is usually tied to floating rates are not affected by the OPR hike?
To rub salt into the wound he was also reported to have said that the most recent OPR hike was in response to interest rate hike by the US Federal Reserve a week earlier. He also mentioned that inflation in the country is now under control.
The minister further explained that an increase in US interest rates will necessitate a similar move by Malaysia as it cannot afford a drop in its currency or the departure of foreign investors.
Moreover, according to him, if we do not match our rates with that of the global market then our currency will drop and this will indirectly cause an increase in prices.
Economic principles aside, from a moral viewpoint is it ethical for Bank Negara Malaysia (BNM) to allow banks to gain an unfair advantage “by riding on the OPR hikes” at the expense of the struggling rakyat?
Isn’t there a hint of opportunism and even “profiteering” there? Think about it.
In any case when BNM refrained from raising the OPR the last time around did it result in our currency plunging? Did the local share market crash? The answer to both of course is “no”, but is our Economy Minister aware of this?
It’s also common sense that with higher net interest margins (NIM) some banks’ earnings are expected to shoot up this year…which means the ordinary rakyat will be forced to ikat perut (literally sacrifice their meals!) to enable the banks to reap a windfall!
This may prompt many to ask – what’s the use of Menu Rahmah and all the other well-meaning financial assistance offered by the government when people have to pay more to banks for their home loan instalments each time there is a hike in OPR?
To understand their plight, imagine, a borrower here who had taken out a home loan three years ago for say RM300,000 may now have to pay an additional RM200 to RM300 per month! The scary part is that the amount may keep increasing.
Honestly, why must those in the lower- and middle-income groups in Malaysia be forced to bite the bullet just because another foreign government decides to increase its interest rate in order to “save” its own country?
Additionally, many would be complaining with some justification that their salary only increases once a year but their loan instalments may increase multiple times a year due to OPR hikes!
Furthermore, since ihsan (compassion) is one of the core values of the government’s Malaysia Madani concept, shouldn’t they do something to lift the unfair pressure on the people and help alleviate their suffering?
Why can’t they instruct the banks not to adjust the borrowers’ instalment automatically each time there is a hike in OPR?
Instead, give borrowers the “option” whether to accept a higher instalment or choose to retain their current instalment or even their original instalment.
This can easily be done by having them execute a simple supplementary agreement. Moreover, OPR is known to fluctuate, meaning one day in the future it will likely go down, which will then cancel out the earlier hikes.
Won’t this be a win-win solution to ease the suffering of the people while at the same time allow BNM to do what it feels is right for the country’s long term economic sustainability? – May 18, 2023
JK Joseph
Ayer Keroh
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
