TO sustain robust economic growth, Bank Negara Malaysia (BNM) must stop raising interest rates as it burdens borrowers, Lim Guan Eng said.

The former finance minister called on the government to state whether this year’s strong second quarter growth of 8.9% was largely due to premature EPF withdrawals that were disbursed in April.

“If so, then growth for the third and fourth quarters may not be so robust since the effect from the expenditure of the RM10,000 one-off EPF special withdrawals amounting to RM44 billion would have greatly dissipated (by then),” the DAP chairman said in a statement today.

He said since 2020, the government has allowed three special EPF withdrawal schemes – i-Lestari, i-Sinar and i-Citra – resulting in RM101 billion being withdrawn from the workers’ retirement fund.

As the statutory contribution rate was reduced at the same time, resulting in RM10 billion less in deposits, he said a total of RM155 billion was withdrawn from EPF in the past 27 months.

“As primary drivers of economic growth, private sector consumption and investment only grew by 5.5% and 0.4% in the first quarter of 2022. 

“If the RM44 billion from the RM10,000 one-off special EPF withdrawal did not generate the 18.3% jump in private sector consumption for the second quarter, Bank Negara should determine the source of the increase,” said the Bagan MP.

Lim said BNM should stop increasing interest rates if it wants to sustain robust growth. 

“Despite Malaysia’s GDP growing for the first half of 2022 by 6.9%, this is not reflected in the performance of Bursa Malaysia and in the value of the ringgit.  

“The ringgit continues to decline against the Singapore dollar, falling to the lowest value on record of RM3.25 on August 11, falling to a five-year low to the US dollar of RM4.46, and it has even weakened against the Indonesian rupiah.

“Despite high oil and palm oil prices, the ringgit continues to depreciate when it should be strengthening. Bank Negara’s increase of interest rates by 50 basis points has no discernible effect. The weak ringgit has wreaked havoc for businessmen with prices rising for imported materials,” said Lim. 

He said there is concern whether Malaysia’s second quarter economic growth was too reliant on firm domestic demand. 

“Since there are no more RM44 billion one-off EPF special withdrawals in the pipeline, Malaysia’s economic growth will depend on external demand, which is subject to slower global growth.” – August 13, 2022.