Mixed project: Liew (left) briefing Johari on the Bukit Bintang City Centre after the launch of its sales gallery
KUALA LUMPUR: Deputy Finance Minister Datuk Johari Abdul Ghani said Bank Negara lowering the statutory reserve requirements (SRR) is “a good move” as it would help to release some RM6bil into the market.
“It will create more liquidity,” Johari said.
He was speaking at the launch of Bukit Bintang City Centre (BBCC) sales gallery at the former Pudu Prison site where a mixed integrated development is being undertaken by UDA Holdings Bhd, Eco World Development Group Bhd and Employees Provident Fund (EPF) on a 40:40:20 structure via a special purpose vehicle BBCC Development Sdn Bhd.
Bank Negara announced yesterday that it was reducing the SRR ratio from 4% to 3.5%, effective Feb 1 to ensure sufficient liquidity in the domestic financial system. The central bank said the move was to support the orderly function of the domestic financial market. At the same time, it would keep the overnight policy rate (OPR) unchanged at 3.25%.
Malaysia has been buffeted by the fall in oil price and a volatile ringgit the past year. This is the first time since July 2011 that Bank Negara has adjusted the SRR.
The SRR refers to the amount of funds that commercial banks are required to keep with the central bank, interest-free. It is an instrument to manage liquidity, while the OPR is the rate at which banks lend to each other. The lowering of the SRR comes in the midst of “a re-calibration” of Budget 2016 which will be announced next Thursday, Jan 28.
Johari said the Budget review next week “will not impact the social safety net of the public” in initiatives such as BR1M payouts and education.
A note by CIMB Research said liquidity had “tightened quite markedly” and there was a possibility that the central bank may have yet another cut in SRR if liquidity continued to tighten, but the OPR was expected to remain unchanged as high household debt was a risk to the country’s national financial stability.
The note said there was “no real risk of growth slipping to recessionary levels yet.”
On the BBCC development, Johari who is instrumental in mooting the consortium between three parties while he was UDA chairman in Febuary 2015, said the RM8.7bil gross development value project was “meaningful and significant” for him personally, for the government and the city authorities.
“It is one of the projects under the government’s Economic Transformation Plan Programme (ETP) to further develop Greater KL as a key engine of growth,” he said.
Johari said BBCC was a public-private sector enterprise between the three partners and the project would rejuvenate city-living because of its various components and public transport linkages.
Eco World Development Group Bhd chairman Tan Sri Liew Kee Sin said with so much negative things floating around the world today, it was necessary to seek out the positive and BBCC would be one of them.
“We must have the faith in our abilities to do things properly,” said Liew.
BBCC Development Sdn Bhd CEO Datuk Richard Ong said phase 1 would take up about 10 acres, about half of the 19.40-acre development. Infrastructure changes and the building of a few tunnels and other amenities will involve RM250mil to RM300mil. The 100-year-old Pudu Prison was closed in 1996 demolished in 2009.