LATELY, there have been calls by international aid organisations, such as Catholic Caritas, for seven rich nations of the world to cancel the debt of poorer countries. This comes in the context of the current G7 summit.

According to these organisations, Covid-19 has put the rampant social injustices in today’s world under a magnifying glass.

“The only way to rebuild the future must be by eliminating such injustices,” says Aloysius John, secretary-general of Caritas Internationalis, the global confederation of some 165 national Catholic humanitarian and development agencies.

“The G7 countries must lead the way in Covid-19 response and recovery to support those worst affected by the pandemic and support a just, green recovery.

“And the first step is to ensure that all debt payments are cancelled, including to private creditors. This is the quickest way of getting finance to where it is most needed.”

Reflecting on this international appeal in a national sense, it is vital to recognise the fact that the household debt in Malaysia, which is among the highest in Asia, requires much of debt cancellation.

The M40 and B40 are suffering under the current full lockdown and many are unemployed. They will need to finance the most important needs of their families rather than be burdened with loans.

How will people service their loans when they are not able to raise income due prolong lockdowns?

Looking at Covid-19 trends internationally, there is a sense of unpredictability in containing the virus, where lockdowns have become a normal feature.

Even if there is an exit strategy in the coming months, with the higher rate of unemployment, how would a pay back of loans be made possible?

Furthermore, industries that are burden with debt could take a strategic initiative of restructuring their workforce by reducing the number of staff by upgrading technology. This would prolong structural unemployment in certain segment of society.

Even if there a short period of loan moratorium, those who are affected will still need to repay their debt in the long term in depressing economic conditions.

Some of them would need to bear the burden of reduced salary.

Would this not take away their purchasing power, which is critical to the revival of the economy?

The fact that the banking industry reported a profit of RM32.3 billion in 2019 and RM23 billion last year should be an indicator that the common good of the country should lead these banks to cancelled the debt of the most vulnerable in the population.

It is apparent that the banking industry can afford to carry out its corporate social responsibility in a more meaningful way by cancelling the debt of M40 and B40, instead of the current arrangement that seems to provide temporary relief in an unpredictable economic environment.

It is vital that banks play a part in helping the M40 and B40 who are either unemployed or force to shut down their business by cancelling their debt.

The relevance of international debt relief should inspire the country’s political and economic elites to uphold a national sense of justice by providing debt cancellation.

This will help empower and recover the purchasing strength of the M40 and B40 groups in the current and post-Covid-19 scenario.

We need to address the rampant injustice of high household debt, made worst by the pandemic, and build an equitable exit strategy. – June 13, 2021.

* Ronald Benjamin is secretary of the Association for Community and Dialogue.

* 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.