Malaysia Financial Crisis Case Study

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The Differences in The Policy in The Financial Crisis and The Impact between Malaysia and Singapore Asian Financial Crisis Malaysia In advanced of recover from the Asian Financial Crisis, Malaysia did not embraced the International Monetory Fund (IMF) and refused the aid offered from the IMF. In 1998, the prime minister, Mahathir Mohammad, had imposed the selective capital controls, which was an attempt to bring stability in the exchange rate, and regain control of monetory policy. It was design to break the link between the domestic interest rates and the exchange rate so the monetory policy could be set without having external disciplining forces of the exchange rate to reckon with. It help to support a fiscal stimulus and also provide…show more content…
one of the key recommendations included in the NERP was easing of fiscal and monetory policies, as well as lowering the cost of capital to revitalize the economy. This plan provided an opportunity for economic fundamentals to reassert themselves. With this, the focus of economic policies shifted away from the prevention of further economic contraction toward reflation of the economy.With respect to monetory policy, Bank Negara Malaysia reduced the intervention rate from 11.0 per cent to 7.0 per cent, while the SRR requirement was likewise reduced in stages from a high of 13.5 per cent to 4.0 per cent to give borrowers access to funds at reasonable rates. In terms of fiscal policy, the government introduced a stimulus package worth RM 7 billion, as well as earmarked and/ or expanded existing specialized finds to ensure priority sectors access to credit at reasonable cost. The easier monetory policy led to a considerable easing of the liquidity…show more content…
Expansionary fiscal policy On 4 November 2008, the Government announced the first economic stimulus package amounting to RM7 billion. The funds provided by the stimulus package would be allocated to projects that have high and immediate multiplier impacts on the economy. The government also set up an Investment Fund to attract more private sector investments. Several measures to directly boosting domestic consumption were also introduced, such as a reduction of Employment Provident Fund (EPF) contributions and a higher vehicle loan eligibility for government servants. Since the RM7 billion stimulus package is not enough to prevent Malaysia from slipping into deep recession, so government announced a second economic stimulus package of RM60 billion on 10 March 2009. The stimulus package was allocated for various purpose: fiscal injection (RM15 billion), Gurantee Funds (RM 25 billion), equity investments (RM 10 billion), RM7 billion private finance intiative (PFI) and off-budget projects (RM 7 billion) and tax incentives (RM3

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