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  • Writer's pictureBait Al-Amanah

Budget 2022 Cash Assistance: Right Move with Room for Improvement

By Benedict Weerasena, Economist of Bait Al-Amanah

In the recent Budget 2022, another direct cash aid scheme for Malaysian households was introduced, dubbed the new Bantuan Keluarga Malaysia (BKM) scheme set to benefit 9.6 million recipients. Families earning less than RM2,500 with three children or more will get RM2,000, while those with one to two children will receive RM1,500 while childless families will get RM1,000.

This direct cash assistance with the specific enhancements is the right way forward. For instance, the amount distributed takes into account household size, instead of applying a one-size-fits-all approach. This is highly important to prevent concealing the different economic realities faced by households with a higher number of dependents.

Furthermore, single parents with children will receive additional assistance of RM500, while an additional RM300 will be given to the elderly as well. This targeted approach in providing additional assistance to single-parent households is a wise move, considering the double burden of caring for their families while working during the pandemic.

Besides that, 3.8 million singles earning less than RM2,500 will receive RM350.

In terms of the mechanism, it is highly important that the distribution of cash assistance be made based on the latest available household income classification data and on a revised poverty line income, accounting for the effects of the pandemic.

This is to prevent exclusion error of outliers trapped in poverty which have long fallen through the cracks and also households that have recently fallen into poverty. For instance, 20% or about 600,000 households from the M40 group have dropped into the B40 group due to the Covid-19 pandemic.

While cash handouts are highly important for temporary relief in times of crisis, there is a need for the Government to look beyond cash relief in the medium to long term. There needs to be an exit or graduation policy from cash handouts for those who have been lifted out of the vulnerability to poverty, so that resources can be better targeted at those who are truly in need.

More importantly, a dignified empowerment strategy is significant for graduation from cash assistance programmes to become agents of change. For instance, in the medium term, Malaysia needs to boost investment in Active Labour Market Policies (ALMP) to promote upward labour mobility for long-term financial independence.

*An excerpt of this opinion piece was reported in Free Malaysia Today. Please refer to the attachment below for the full FMT article by Annmira Joseph 

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