PUTRAJAYA: The Malaysian government’s decision to implement targeted diesel subsidies is necessary to save the country, Prime Minister Anwar Ibrahim said on Monday (Jun 10).
Action must be taken, even though the measure is unpopular, Anwar said during a monthly assembly with staff from the Prime Minister’s Department.
Malaysia has started shifting away from costly blanket subsidies in favour of a more targeted approach that mainly helps the needy.
The country, which heavily subsidises prices of fuel, cooking oil and rice among other basic items, has seen its subsidy bill rise to record levels in recent years amid surging commodity prices, straining government coffers.
Its diesel subsidy bill alone has risen 10-fold from RM1.4 billion in 2019 to RM14.3 billion in 2023.
“Who wants this targeted subsidy? We must also know that whatever we do, we will be severely criticised with all sorts of slander and lies,” said Anwar, who is also finance minister.
“In fact, we have said that all prime ministers before this had agreed on the targeted subsidy, but there was no political will to implement it because of the risks involved. However, to save the country, we have no choice.”
On Sunday, Malaysia announced that the price of diesel in Peninsular Malaysia would increase by over 50 per cent to RM3.35 (US$0.71) per litre. This took effect on Monday.
This is the unsubsidised market price based on the May 2024 average according to the Automatic Pricing Mechanism formula, said the country’s second finance minister, Amir Hamzah Azizan.
“We are doing this because the leakages (of subsidised diesel) across our borders is huge,” he added.
Diesel will remain at RM2.15 per litre in Sabah and Sarawak.
Diesel for low-income groups, including fishermen and farmers, as well as for the use of school buses and ambulances, will continue to be subsidised, said Amir Hamzah, adding that the new plan would not lead to an “escalation of prices”.
Cutting diesel subsidies is expected to save the government about RM4 billion annually and this move would strengthen the country’s financial position in the long term, he added.
Analyst Oh Ei Sun from the Pacific Research Center of Malaysia told AFP that the “financial situation must be quite urgent for this government to adopt such an unpopular measure”.
Malaysia is expected to spend RM52.8 billion on subsidies and social assistance this year, down from about RM64.2 billion in 2023, based on its 2024 budget.
