Economic downturn How to manage the income relief loan
During an economic downturn, such as already happened during the covid-19 pandemic, the government can provide an income relief loan to every worker who is impacted. 

I suggest that this relief loan be managed as follows:

a) An approved amount will be calculated for each worker based on 80% of the average monthly income for the previous year.  This amount can be raised to a minimum level considered to be necessary to meet the basic expenses for a worker.

For example, if the average monthly wage is $2,000, the approved amount is $1,600. If it is $500, the approved amount of $400 is raised to a minimum of $1,500. 

The amounts are calculated based on CPF records. The worker can request for the approved amount to be reduced, if they do not require the full amount. The worker has to provide the bank account to be credited.

b) The worker can be credited with a monthly relief loan that is equal to the approved amount less the actual earnings for the month. This will be credited monthly to the bank account.

c) The worker can return any unused amount from a bank transfer to reduce the accumulated balance of the relief loan.

d) The relief loan can be set at a cap of $50,000. It will cease when this cap is reached. 

e) The relief loan will carry interest at the same rate that is credited to the CPF ordinary account, i.e. 2.5% per annum.

f) This relief loan can be administered by the Central Provident Fund.

This system can be set up quite quickly. It can be activated during an economic downturn and continue for the duration of the downturn. 

After the recovery, the system can continue for retrenched workers. They can receive a relief loan for up to 6 or 12 months from the month that they have been retrenched.  It will help to tide them over during the period that they need to find a new job or to adjust their financial lifestyle.

I hope that the government can put up this system in place early.

Tan Kin Lian

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