Say goodbye to blanket petrol subsidies soon, government putting forward targeted assistance

The government has announced that they have started work on a more targeted petrol and cooking oil subsidy plan. The decision was made to help prevent an increase in living costs that would happen should the blanket subsidy be removed entirely.

The announcement came from economic affairs minister Mustapa Mohamed during an interview with Bloomberg TV.

Mustapa said that the targeted plan is to ensure those that need the subsidy, receive the benefits. He also points that the sooner the new targeted subsidy is implemented, the sooner it will relieve pressure on the government’s budget.

Just last Friday (3-June-2022), the finance ministry revealed that it anticipates subsidies to push the government’s total spending in 2022 by about RM 30 billion, which is significantly higher than in 2021.

Also read: Azmin Ali: Those with BMWs cannot enjoy the same subsidies as driving Kancils, targeted fuel subsidy could come soon

The ministry explained that the higher revenue from rising commodity prices was insufficient to offset the spike. The extra funds were mainly for petrol, chicken, and egg subsidies as well as flood relief.

Prime Minister Ismail Sabri Yaakob himself told the press on Monday that the final subsidy bill this year could be expected to breach RM 71 billion.

Mustapa is not too worried about the inflation rate though. He told Bloomberg that the inflation rate is expected to increase slightly but will still remain within the forecast range of 2.2 percent to 3.2 percent in 2022.

According to the report, consumer prices rose by a modest 2.3 percent in April, while the core measure that strips volatile food and energy costs gained 2.1 percent. The rising prices are said to correspond with Malaysia’s economic recovery.

Also read: CAP: Introduce electronic card system for fuel subsidy, targeted aid for B40 and M40 groups

Another improvement that the government was happy to report was that gross domestic product gained speed in the first quarter of the year. The improvement was also attributed to the country’s move into the endemic phase.

The improvement has allowed the central bank room to raise borrowing costs in May to pre-emptively fight inflation.

Bank Negara Malaysia estimates the economy to quicken anywhere from 5.3 percent and 6.3 percent this year compared to a year ago. Mustapa affirms the forecast revealing that this is “premised on good growth in the first quarter of 2022 of 5 percent.”

“The first few months of the second quarter, particularly April and May, look promising. So, for the first half, we’re going to do well, and for the year as a whole, we remain optimistic that 5.3% to 6.3% is achievable as highlighted by our central bank.”

Also read: Brace yourself for fuel subsidy cut; RM 4 billion worth of petrol subsidies paid as of March