THE recent rapid inflation in the country, causing immediate financial burdens to Malaysians and affecting our social, mental, and physical well-being, is extremely concerning. This issue has been made worse by the recent announcement by the domestic trade and consumer affairs minister that public subsidies on basket of goods will be lifted effective July 1. 

This is, and should be treated as, a national crisis.

As Malaysia recovers socio-economically from the pandemic, the rise of living costs compounds the financial stresses resulting from extra expenses incurred in the last two years, such as maintaining the standard operating procedure, the loss of business opportunities, and supply chain disruptions, just to name a few. 

At time of writing, the government has yet to announce a solid mechanism to tackle this national crisis as it continues to worsen. As the removal of subsidies on chicken, eggs and bottled cooking oil comes into effect on July 1, it is inevitable that the prices of these staples will continue to soar, further exacerbating “shrinkflation”, where food costs at eateries go up while portions get smaller. The RM100 handout announced by the prime minister may help for a week, but how will it help Keluarga Malaysia in the months to follow?

Taking into account the prime minister’s U-turn yesterday that the chicken price would not be floated and a new ceiling price would be introduced instead, it has to be pointed out that the government is simply treating the symptoms, not the disease. The U-turn and the announcement of a new ceiling price for chicken will not yield sustainable economic effects. 

This national crisis has moved my party, Parti Aspirasi Sains Malaysia (SAINS), and I to urge Prime Minister Ismail Sabri Yaakob, and his undeservedly well-stocked cabinet, to consider the following short- and long-term approaches to achieve a healthy inflation rate target gradually.

1. Control money supply

The latest data on Malaysia’s Money Supply (M1) as of April 2022 stood at over RM620 billion, a steep rise, from RM450 billion before the pandemic – an increase of nearly 38% in just over two years. The rapid increase in money supply (M1) is certainly a major contributing factor to the current inflation rate and it needs to be controlled desperately before the situation worsens. 

If we look at the United States, the latest number on its money supply (M1) is approximately US$21 trillion (RM92.44 trillion), an exponential rise from its pre-pandemic supply, which stood at around US$5 trillion in early 2020, with inflation shooting up to 8.6% as of May 2022, the largest jump since December 1981.

Thus, there is a pressing need for the government to be extra careful when it comes to sudden injections of cash into the economy that encourage short-term spendings such as EPF withdrawals.

2. Reactive fiscal policies

An improved and reactive taxation system is needed to reduce inflationary pressures while bringing down public spending to optimise the government budget as well as reducing additional unnecessary general demands to the economy. Megaprojects should be suspended for the time being to minimise the demand on the economy.

The recent increment on the allowance paid to the chairman of Felda Global Ventures is a slap in the face of struggling everyday Malaysians who are still suffering from the aftermath of ill-conceived pandemic policies. Instead, all exorbitant allowances and any further increments to political appointees in government-linked companies and government-linked investment companies, as well as cabinet salaries, should all be frozen until positive indicators are met. 

3. Revision of monetary policies 

As the economic activities recover from the pandemic, there needs to be a proactive policy that ensures demand does not grow faster than its capacity, which causes “demand-pull” inflationary pressures as the industry responds to shortages by increasing prices overnight. 

Another interest rate revision is overdue to make borrowing more expensive and saving more incentivised. This, in the short term, should lead to a more gradual and expected growth in the consumer spending and investment behaviour among Malaysians. In the medium term, this should help minimise exchange rate fluctuations that can lead to cheaper imports while reducing the demand of exports, motivating exporters to cut costs. 

4. New wage policies 

In the long term, we should look into better and equitable wage policies that ensure fairer wages to the working class and narrow the income and wealth gap in Malaysia. At the moment, the minimum wage for employees in Malaysia is extremely low in relation to their employers. The new wage policies should look at calibrating and adjusting the minimum wage to the inflation rate to reflect a more realistic picture.

5. A new welfare policy (guaranteed monthly income)

Instead of the periodical, insulting knee-jerk handouts that have now become all too common as a way for the government to pacify the disgruntled public over worsening economic woes, Malaysia should guarantee a monthly income of RM1,500 to every B60 household.

This will not only alleviate the financial burden caused by inflation, but also address the socio-economic issues directly by spurring economic growth and social mobility in sub-urban and rural areas of the country, creating new opportunities for businesses to capture, and government to generate tax revenues.

SAINS believes a guaranteed monthly income plan will ease financial strains on the working class in Malaysia while at the same time, overcome money politics. It is also a way to channel back the subsidies that had been taken away from these communities. 

Nonetheless, members of SAINS also do not discount the possibility of mobilising in solidarity with our fellow Malaysians who continue to suffer from the government’s inaction, inefficiency and ineptitude. 

Extraordinary times call for extraordinary measures. – June 25, 2022.

* Kenneth Chai is pro tem president of Parti Aspirasi Sains Malaysia.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.