For the most parts, the point of having a stimulus is to encourage spending, especially domestically. Someone’s spending is someone else’s income. This is a corollary to the necessacity of a stimulus being timely in order to be effective.

The Ministry of Finance under Lim Guan Eng has been working on all of the measures, but with the political maneuvering over the weekend, he did not get a chance to defend them. Near the end of the stimulus preparation sprint, the PMO had full control of the process though they had no real time to revamp anything, except by cancelling measures or quibbling with minor details. Some of the quibbling involved unenlightened changes to the e-Tunai Rakyat design.

The e-Tunai Rakyat in its current stimulus form as announced by the Prime Minister will like fail to meet any stimulus purpose. As revealed yesterday, cash transfer recipients under the Bantuan Sara Hidup or BSH would receive RM50 in the form of e-Tunai. Given the qualification, that means up to potentially 3.9 million people would receive the RM50.

Here is the qualification, based on the exact wording from the stimulus measure book:

30. In the spirit of shared prosperity, the Government will enhance BSH as follows:

i) bring forward BSH payment of RM200 scheduled by May 2020 to be paid in March 2020;
ii) additional one-off cash payment of RM100 will be made to all BSH recipients in May 2020; and
iii) a further RM50 will be subsequently channelled through e-tunai.

There is one big problem here: giving e-Tunai to BSH recipients would very likely result with little of that money being spent. The fact is many of BSH receipts who are largely members of the bottom 40% of Malaysians in terms of income do not own mobile devices capable of facilitating mobile and electronic transactions. Without such devices, there can be no transactions.

For a better policy design, we should look no farther than the first e-Tunai Rakyat program executed by the Finance Ministry in January 2020. That government program could benefit up to 15 million Malaysians aged 18 and above, who earned less than RM100,000 yearly. With the program ending in mid-March 2020, the current statistics have it that 6.9 million people have claimed the money. That translates into a use rate of 46% out of total eligible recipients after nearly 2 months of operation.

Remember, it reached 46% utilization, likely hitting 50% by the end of the program, because the money with an expiry date (policy innovation!) went to many whom use smartphones. If we limited it to a group that has very low smartphone penetration rate, that utilization rate will come down. Now, you can encourage the program among the low income groups, but this is not the right way.

Therefore, the stimulus form of e-Tunai Rakyat, mutilated as it is, with its smaller reach among the low-income demography would likely struggle to follow the same trajectory and success. It has been mistargeted to the point of irrelevance. This defeats the purpose of having e-Tunai Rakyat as a stimulus. It is a grave design flaw, making the program incapable of hitting any stimulus objective. It is not even a good signalling.

The solution to this: return to the original MOF design, or repurpose the money to something else.

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