Experts Highlight Need To Resolve Issues Ahead of RON95 Rationalisation

The government's recent announcement of diesel subsidy rationalisation has sparked widespread public outrage and criticism. 

In response, Dr. Ahmed Razman Abdul Latiff, economic analyst from Putra Business School, emphasised the importance of learning from this initiative. 

Speaking recently with local daily New Straits Times (NST), he stressed that the government must address financial assistance and communication issues before considering any changes to the RON95 subsidy. 

Dr. Razman highlighted the necessity of clear communication to convey the benefits to the intended recipients and transparency in the implementation process.

Dr Razman noted that rationalising the RON95 subsidy is essential for the government to better manage its finances and reduce wastage and leakage in subsidy distribution. 

He pointed out that this move aims to ensure that financial assistance reaches those who truly need it. However, he also warned that such changes could lead to higher inflation, potentially slowing down domestic economic activities.

Economy Minister Rafizi Ramli, in a written reply to Parliament, mentioned that the government is considering including RON95 in its subsidy rationalisation efforts.  He also clarified that the current focus remains on diesel subsidies until these are effectively targeted and leakages are minimised.

Meanwhile, Associate Professor Aimi Zulhazmi Abdul Rashid from the University of Kuala Lumpur's Business School argued that petrol subsidy rationalisation should not occur this year.  He explained that consumers and traders have not yet fully absorbed the impact of the recent diesel price increase. 

Additionally, enforcement authorities are currently preoccupied with managing targeted diesel subsidies. Aimi suggested that next year would be more appropriate for implementing the targeted RON95 subsidy, as it directly affects Malaysians.

Aimi also remarked that the 2025 Budget would provide a clearer picture of the targeted diesel subsidy’s economic impact, particularly on inflation. 

He noted the expected weakening of the ringgit and its effects on imported food prices, coupled with rising RON95 prices, could push inflation rates above Bank Negara Malaysia's initial forecast of 3.5 percent for this year. KR