Maybank IB: Govt Must Raise RON95 Price

A simulation by Maybank Investment Bank (Maybank IB) suggests that the price of RON95 petrol needs to increase in order for the government to save further on subsidies.

According to the financial institution, the government can either raise RON95 price  by 32 cents per litre (+15.6%) starting July 1, 2024, or 65 sen per litre (+31.7%) on Oct 1, 2024.

Either will enable the government to save an additional RM4.1 billion it requires as part of the overall the 2024 Budget’s target of reducing subsidy expenditures by RM11.5 billion.

This was highlighted by Suhaimi Ilias, Chief Economist at Maybank IB. Said analyst also pointed out that the government has already achieved RM7.4 billion of this target.

From which, RM4 billion stemmed from targeted electricity subsidies, whilst a further RM1.2 billion came from removing chicken price subsidies. An additional RM2.2 billion in savings is expected from the targeted diesel subsidy scheme which kicked off yesterday.

Speaking of, the targeted diesel subsidy represents a prorated rate of RM4 billion achievable over the course of a full year as detailed by Datuk Seri Amir Hamzah Azizan, Finance Minister 2.

The Maybank IB analyst also went on to add that the timing of the RON95 petrol price increase is ultimately the government's decision, still, it won’t be surprising if the implementation of targeted RON95 petrol subsidy rationalisation was delayed.

For context, Maybank IB noted that a 10 sen per litre increase in RON95 petrol could save RM2.5 billion in subsidies for a full year.

Suhaimi however also added that any shortfalls in the targeted RM4.1 billion can be covered by additional Petronas dividends beyond the estimated RM32 billion this year.