Anwar: Fuel Subsidies Would Be Cut At The “Right Time”

Malaysian Prime Minister Anwar Ibrahim has reaffirmed the need to reduce unnecessary spending, especially excessive subsidies, in order to control government debt. He has not, however, committed to a precise date for the removal of fuel subsidies.

Anwar said this in an interview with Bloomberg Television at the Qatar Economic Forum yesterday, but stressed that they must be executed with caution. "How do we then proceed to undertake this reform without punishing the poor - that to my mind is very central," he stated, before adding, "We will do it at the right time."

Previously, Economy Minister Rafizi Ramli had explored providing financial aid to eligible Malaysians via monthly cash transfers using data from the Pangkalan Data Utama (PADU) database.

Currently, Malaysia's extensive fuel and cooking oil subsidies costs the government an estimated RM81 billion. This year, Anwar plans to replace these broad subsidies with tailored aid to help reduce the 2024 budget deficit to 4.3% from the country’s GDP, down from 5% in 2023.

Early in his administration, Anwar promised to restore Malaysia's economic health and reduce government debt, which now surpasses 60% of GDP. Achieving this could attract more investors to Southeast Asia's only A-rated emerging economy, perhaps driving growth up to 6%.

While these reforms are likely to boost Malaysia's attractiveness to foreign investors, they may also further erode Anwar's popularity, which has been decreasing since he assumed office in late 2022 as a result of growing displeasure with the government's economic policies.

Earlier last month, foreign media reported that Anwar intended to start the targeted fuel subsidy in June. This was followed by severe backlash on social media, even prompting ex-Prime Minister, Muhyiddin Yassin calling the government to reconsider subsidy removal as the subsidies only provide fiscal issues. The former PM added that the government must assess whether such removal will exacerbate the people's hardships.

However, Communications Minister Fahmi Fadzil quickly refuted this, noting that subsidy adjustments were not addressed at the most recent cabinet meeting he attended.