The preliminary International Monetary Fund (IMF) Staff Report on the Malaysian economy was published by the press on Feb 5.

This report followed intense IMF Annual Consultations held between Jan 11 to 22 in Kuala Lumpur and Kuching. It’s a pity Sabah was left out.

The IMF Report was politically too correct, but nevertheless revealing The IMF Mission chairperson Dr Alex Mourmouras in his press release subtly suggested that the Malaysian economy faced multiple shocks including ‘political developments and capital outflows’.

Both these factors reveal that in addition to external problems, there are also serious internal issues that are within our powers to control and overcome. But how much have we done to overcome these critical domestic issues?

The IMF, like the World Bank, are both highly competent international institutions. However they both suffer from the challenges of wanting to tell the whole truth, but in subtle and polite ways and yet to reveal the real issues and problems, facing member countries like Malaysia.

It’s a difficult assignment and as a result, their important messages to us are often not pointed enough. Hence they often don’t get through to the recipients and policy makers effectively enough to encourage stronger economic policy responses. Hence we have to read the IMF reports between the lines and see through to ascertain what messages they truly want to convey to us.

The latest IMF Report therefore left the following messages behind for us to ponder and to follow up in our own policy reviews, practices and action plans -

1. Firstly, the IMF commended Malaysia for “maintaining macro-economic and financial stability, while making significant progress in improving the foundations for substantial economic growth over the medium term”. But the IMF does not specifically mention what was the “significant progress”?

Was it the introduction of the Goods and Services Tax (GST) and the reduction of subsidies? Was this sufficient or was the IMF being subtle and polite? The IMF should be bold and say so. Then we can be clear and follow.

Also what about the more significant fundamentals that are necessary to improve our economy, like fully adopting the New Economic Model, reducing inflation, arresting the rapid decline of our ringgit and improving our competition and productivity and our labour force, etc?

2. The IMF statement mentions that, “although growth has slowed down to about 4.4 percent, the downside risks predominate”. The IMF again does not point out clearly as to what these predominant risks actually are. Do they relate to the debilitating racial, religious undercurrents and the current financial scandals that have badly undermined business confidence and raised the trust deficit?

The IMF has to be more definitive in their remarks and not keep us guessing their subtle and polite politically correct statements.

How temporary is temporary?

3. Inflation is such an important socio-economic threat to our incomes and social well-being, especially of the poor and the lower middle income groups. Indeed the Bottom 40 percent of our people face severe financial hardships as prices steadily go up. Yet the IMF casually dismisses this critical factor by stating that “inflation should rise temporarily”. How long can temporary be?

The same argument was used about our long-drawn-out ringgit decline. Bank Negara had said that the ringgit fall would be temporary. But the fall continues indefinitely. So how temporary is temporary?

Inflation is debilitating and can cause social instability and even some social unrest. But the IMF does not give us solutions to consider, although it has had world-wide experience in dealing with inflation.

Even if the IMF has given some ideas, can't they be made transparent to the public, who suffer from and can’t easily fly away from the scourge? Here the IMF should have also consulted the representatives from the rakyat and the leading NGOs, instead of mainly consulting politicians and officials?

4. The IMF stated that “protecting the Budget should be a top priority and applauded the authorities’ determination to adhere to the federal government’s deficit target of 3.1 percent of the of GDP for 2016".

This is also politically correct and subtle. But could the IMF have advised that this target need not be cast in stone and that some relaxation can be allowed, within reasonable limits. Why does the IMF take the easy standard approach of one size fits all?

Can the IMF be more innovative and pragmatic, please?

5. On its response to capital outflows, the IMF states politically politely that, “Bank Negara Malaysia (BNM) has allowed the ringgit to depreciate”. Honestly, could BNM have done anything else?

Could BNM have resisted and arrested the depreciation and if so for how long? Come, come, IMF, please be more forthcoming and open with your members all over the world to safeguard your reputation that has often been battered before.

6. Finally, the IMF again subtly and politically correctly “welcomed plans to strengthen anti - corruption measures and confidence in official institutions”.

This could have been the most crucial recommendation of the IMF, particularly at this juncture of our economic history. But the IMF has again chosen to be too soft, subtle and politically correct, to make a more bold and significant recommendations, to improve our macro economic policies, on a sustainable basis. We need more transparent dialogue that is more revealing.

Conclusion

We see that the IMF team has serious constraints. But we can only hope that the IMF board of directors in Washington, when they consider this preliminary IMF Staff Report next month, will ensure that the final IMF Report is -

1. More balanced and pointed and constructively critical and less politically correct, and that

2. The IMF Report’s analysis and recommendations will have a longer term perspective, to encourage the structural reforms that the IMF Report has too subtly urged Malaysia to adopt and to pursue permanently.

In the meantime Happy Chinese New Year and may the Year of the Fiery Monkey bring us a better bag of tricks to enable all Malaysians to look forward to a brighter year ahead.

RAMON NAVARATNAM is chairperson of Asli/Centre of Public Policy Studies.