STR, Sara should remain short term to help with rising living costs

KUALA LUMPUR: The Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (Sara) assistance programmes must remain short-term measures rather than permanent features, as they are designed to help households cope with rising living costs and maintain their purchasing power, an economist said.

The more important objective should be to improve the economic status and living standards of recipients through education and healthcare, as well as cultivate a culture of self-improvement.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said continued reliance on such assistance could undermine the effectiveness of long-term government efforts in areas such as education, training, healthcare and infrastructure in promoting social mobility.

"This can be worrying as this could amplify the degree of income and wealth inequality, which can undermine social cohesion in the economy.

"So, the government should aspire that the recipient of cash aid would eventually be coming down as long-term policies on education, healthcare and infrastructure would be able to provide the right catalyst for the society to experience a better economic status," he told Bernama.

On the economic conditions needed to gradually phase out STR and Sara without putting vulnerable households at risk, Mohd Afzanizam said the government should monitor household income levels and ensure families continue to send their children to school and take care of their health.

"If there is any indication that their income level is rising, then I suppose the cash assistance can be gradually withdrawn.

"However, this can be quite challenging too as the family would have become so used to getting such assistance," he said.

He said government agencies should engage with communities to explain that the assistance is a temporary measure and encourage households to take advantage of government education and training programmes to improve their living standards.

"The main concern is one of moral hazard as the households become too dependent on the cash transfer programmes without enough effort to upgrade skills and earn a better living.

"The government needs to engage and communicate with Malaysian households that these are temporary measures," he added.

Meanwhile, CGS International Securities Malaysia chief economist Nazmi Idrus said STR and Sara should not be viewed as permanent forms of government support or unconditional handouts, but as measures to address income disparities and ensure that the poor have access to basic necessities.

"Assistance programmes help to balance out income disparity and create a more equal society. The government also has a responsibility to ensure that the basic needs of the poor are fulfilled. That is the purpose of STR & Sara. But cash handouts given unconditionally to everybody (like the RM100 Sara) are unnecessary," he said.

He said sustainable wage growth and higher household incomes were crucial to helping recipients eventually become financially independent, although achieving a living wage for everyone would take time.

"There is also risk that too much assistance eliminates the drive to work. So, it will be a balance between the need and the ability of the government to afford it," he said.

On the long-term economic and fiscal implications of making cash assistance a permanent feature of Malaysia's social protection system, Nazmi nevertheless said global trends suggest that such programmes were likely to remain in place.

"What this means is that the government may need to tax the rich more, to help the poor," he said.

He also suggested linking assistance to productivity-enhancing activities, such as requiring recipients of unemployment benefits to seek jobs or providing income support upon completion of training programmes.

"If we create a culture of self-improvement, then the people getting assistance may not be needing it permanently," he said.

Under the 2027 Budget, the government allocated RM16 billion for STR and Sara assistance programmes.