Provisions in the Central Bank Act

There is no evidence that the State Bank has been used by the government to fund the Covid-19 economic recovery program, but the Central Bank Act contains provisions that allow it to provide "temporary funding" to the government if needed. . Bank Negara can legally finance the budget deficit, but under very strict conditions as stipulated in the central bank law, Suhaimi said, but said the government could "take advantage of the market" because it had "sufficient" domestic liquidity due to the high percentage of savings and savings. . Central bank liquidity injection. Another seasoned economist also points to "reasonable policy space", noting that statutory allowances are intended as a kind of "bridging loan" to cover temporary or short-term cash flow deficits rather than allowing the use of unconventional monetary measures. .

In accordance with Section 71 of the Central Bank Act, the State Bank can "provide temporary funding to the government in market conditions related to temporary budget deficits," and the expanded funds "will be disbursed as quickly as possible and at any event. must be paid no later than three months after the end of the current fiscal year being extended. " "The [central bank] 's power to expand funding in the following fiscal year will not be exercised until the funds circulating have been paid," the provision stated. The total amount of expanded funding, with the exception of securities held solely for monetary policy operations, must not exceed "at any time twelve and a half percent of the expected revenue" (revenues) of the federal government during the financial year in which the funding is held. be extended. If there is a political gap between the central bank and the ministers which cannot be resolved peacefully, the matter will eventually be referred to Parliament in accordance with article 72.

While the unprecedented nature of the Covid-19 situation requires central bank monetary policies and government fiscal policies to complement each other to restore confidence and stimulate the economy, cooperation can and must take place without compromising the independence of the central bank. "Any direct support from the central bank for the budget deficit or the government's stimulus package must be conditional and well managed so that abuse does not occur," said Suhaimi. Whether or not quantitative measures are implemented in Malaysia, any policy measures implemented - conventional or otherwise - must not reveal a new problem bigger than the one they are trying to solve.