Malaysia To Begin Work on Making Fuel Subsidies Targeted

Prime Minister Ismail Sabri Yaakob mentioned that this year final subsidy could exceed 71 billion ringgits.

According to the finance ministry, unforeseen subsidies is expected to push the government’s total spending in 2022 “significantly higher”, by about 30 billion ringgit ($6.8 billion).

Apart from that, the higher revenue from rising commodity prices was insufficient to balance the spike. 

The extra funds were mainly for petrol, chicken, and egg subsidies including flood reliefs. 

The Malaysia government has started to work on replacing its blanket petrol and cooking oil subsidies with a more targeted approach.

Meanwhile, government is spending rises to blunt higher living costs.

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“The target is to ensure that those who need subsidies, will get the subsidies,” states Economy Minister Mustapa Mohamed in a Bloomberg TV interview recently. 

“The sooner it is done, of course, it will relieve pressure on the government’s budget,” 

“However, Malaysia’s inflation rate is expected to slightly increase yet remain within the forecast range of 2.2 percent to 3.2 percent in 2022,” the minister added.

Due to the rising prices occurred, it corresponds with the government’s economic recovery. 

As the country experienced severe virus restrictions, the gross domestic product (GDP) rate also hikes in quite a pace during the first quarter of 2022.

The situation has allowed the central bank room to raise borrowing costs last month to pre-emptively fight inflation, despite consumer prices are gaining at the slowest rate in Southeast Asia region. 

Bank Negara Malaysia estimates the economy to quicken anywhere between 5.3 percent and 6.3 percent in 2022 from a year ago, a forecast that Mustapa reaffirmed. 

“The first few months of the second quarter, particularly in April and May look promising. 

“So, first half we’re going to do well, and for the full year, we remain optimistic that 5.3% to 6.3% is achievable as highlighted by our central bank,” he commented.  

(Credits to Bloomberg)