Covid-19: Government announces RM250 billion economic stimulus package

On 27 March 2020, the Prime Minister of Malaysia, Tan Sri Muhyiddin Yassin, announced the Pakej Rangsangan Ekonomi Prihatin Rakyat (‘Caring Package’), a relief and economic stimulus package to assist individuals and businesses to weather the economic challenges brought about by the Covid-19 outbreak.
The Caring Package is in addition to the packages announced on 27 February 2020 and 23 March 2020. Our summary of these measures are available here and here.
The Caring Package, valued at RM250 billion, is reportedly the largest aid package ever introduced by the Malaysian Government. It includes many reliefs for individuals, in particular those in the lower income segment.
The Caring Package includes initiatives valued at RM100 billion to support businesses, including Small and Medium Enterprises (‘SME’). These measures include the following –
  1. Wage Subsidy Programme
To avoid the retrenchment of workers, the Government will also introduce the Wage Subsidy Programme whereby the Government will subsidise the salary of RM600 per month for every employee for three months, subject to the following conditions –
  1. The programme applies only to workers earning less than RM4,000 per month;
  1. The employer must show that it has suffered a decrease of more than 50% in its income since 1 January 2020; and
  1. The employer must ensure that there is no retrenchment or imposition of unpaid leave or wage cut for the next three months after the implementation of the programme.
  1. Assistance for SMEs
To assist SMEs, including micro-entrepreneurs, the Government and Bank Negara Malaysia (‘BNM’) will increase the funding available in the following existing programmes -
  • The Special Relief Facility (SRF) for SMEs will be increased by RM3 billion to RM5 billion and the interest rate for the fund will be reduced from 3.75% to 3.5%;
  • The All Economic Sector Facility fund will be increased by RM1 billion to RM6.8 billion;
  • The Micro Credit Scheme administered by Bank Simpanan Nasional will be increased by RM500 million to RM700 million for soft loans at 2% interest rate without collateral. The minimum operating record of one year is reduced to six months and the maximum financing amount is increased from RM50,000 to RM75,000 for each entrepreneur. The initiative is open to all micro-entrepreneurs in all business sectors including child-care centres, taxi and bus operators as well as the creative industry and online traders;
  • SMEs with business records of less than four years can resort to the BizMula-i and BizWanita-i schemes for financing up to RM300,000 under the Credit Guarantee Malaysia Berhad (CGC); and
  • Syarikat Jaminan Pembiayaan Perniagaan (SJPP) will provide RM5 billion worth of guarantees and increase the guarantee coverage from 70% to 80% for SMEs that face difficulties in obtaining loans.
  1. Deferral/restructuring of EPF contributions
The Employees Provident Fund will introduce the Employer Advisory Services (EAS) programme on 15 April 2020 to provide options for deferral of payments, restructuring and rescheduling of employer contributions to the Fund.
  1. Exemption from HRDF
All employers will be exempted from payment of the Human Resources Development Fund (HRDF) levy for six months commencing April 2020.
  1. Deferment of tax instalments for SMEs
The Government will allow SMEs to defer the payment of income tax instalment payments for three months commencing 1 April 2020. This measure is in addition to the previously announced measures where the Government has postponed tax instalment payments to affected businesses in the tourism sector for 6 months beginning 1 April 2020. Other affected sectors will be allowed to revise the amount of income tax imposed in the third, sixth and ninth instalments during the basic accounting period.
  1. Danajamin Guarantee Scheme
The Government will provide a RM50 billion guarantee scheme with a guarantee of up to 80% of the loan amount for the purpose of financing working capital requirements of viable businesses in all sectors facing difficulties due to the Covid-19 outbreak. The scheme will be managed and subject to credit evaluation by Danajamin. The minimum guaranteed loan size is RM20 million per business. The facility will be available for application from 1 May 2020 to 31 December 2020 or until the fund is fully utilised.
The Prime Minister reiterated that the above measures are in addition to the six-month payment/repayment moratorium announced by BNM on 25 March 2020. He also announced that the moratorium will be extended to loans from TEKUN, MARA and cooperatives as well as other government agencies providing financing to SMEs commencing 1 April 2020.
Tan Sri Muhyiddin also affirmed that the Government will continue the implementation of the projects allocated in the 2020 Budget including the ECRL, MRT2 and the National Fiberisation and Connectivity Plan.
On 27 April 2020, BNM also announced further details of the measures described in section 2 above (including a set of FAQs) as well as other measures. The announcement and FAQs can be accessed here and here.