BNM says monetary policy limited in addressing supply-side shocks

MONETARY policy is fundamentally a demand-management tool and is generally not appropriate for addressing supply-side shocks such as rising fuel and commodity prices, said Bank Negara Malaysia (BNM) Governor Datuk Seri Abdul Rasheed Ghaffour. He said monetary policy is a broad-based instrument that affects the entire economy, making targeted solutions a more prudent and effective approach when dealing with supply-driven disruptions. “However, BNM will remain vigilant if price pressures become more broad-based and prolonged,” he said. “If price pressures from these supply shocks become more widespread and persistent, then monetary policy may have a role to intervene,” he added. Abdul Rasheed said support mechanisms for affected businesses are already in place, with relevant information being actively disseminated to ensure timely assistance reaches those in need. He stressed that a disciplined and prudent approach combining fiscal and monetary policy remains essential to preserving Malaysia’s financial buffers in the event of a worsening economic outlook. “Rather than introducing broad-based stimulus packages, assistance will be focused on specific sectors and businesses that are experiencing genuine financial difficulties,” he said. The BNM governor also said assistance has been made available for businesses affected by the ongoing conflict in West Asia, particularly small and medium-sized enterprises (SMEs), noting that the current situation differs significantly from the COVID-19 pandemic. “This is not like COVID, when movement restrictions were implemented nationwide and affected everyone,” Bernama quoted him saying he said. “This time, the impact is more concentrated in specific sectors, particularly those heavily dependent on oil, petroleum-based products and diesel,” he added. He said among the measures introduced are dedicated funds to help companies access working capital, enabling them to continue operations amid disruptions and cash flow pressures. Support is also available through loan repayment assistance, including restructuring and rescheduling options for affected borrowers. Abdul Rasheed urged businesses facing repayment difficulties to engage early with their respective banks to explore suitable relief measures, including temporary payment moratoriums and revised repayment schedules. In April, BNM introduced the RM5 billion SME Relief and Stability Facility (SME SRF) to support SMEs, including micro enterprises affected by ongoing geopolitical tensions in West Asia. The facility was designed to complement existing banking sector assistance as micro, small and medium enterprises continue to face rising global economic uncertainty. Applications for the SME SRF will open on 15 May 2026 through participating financial institutions. SMEs are advised to refer to the Bank Negara Malaysia website for a list of participating institutions or to contact their respective banks directly. Meanwhile, the Association of Banks in Malaysia (ABM), the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) and the Association of Development Finance Institutions of Malaysia (ADFIM) have welcomed the initiative. The banking industry, they said, remains committed to ensuring viable businesses continue to have access to financing and relevant support, while also stepping up proactive outreach to raise awareness of available assistance measures. In a joint statement issued in April, the associations urged SMEs affected by the conflict to engage early with banks to seek appropriate solutions, including repayment assistance, restructuring options and working capital support.