The Malaysian government, according to Economy Minister Rafizi Ramli, is determined to implement its targeted subsidy program in the second half of 2024.
“We are sticking to it,” he said in an interview at Putrajaya on 16 April.
He reiterated that the current model, which allows the top 20 per cent (T20) households in the country to enjoy 53 per cent of subsidies, is unsustainable.
Accordingly, Rafizi has confirmed that Malaysia will reduce petrol subsidies this year to decrease the country’s fiscal deficit, as reported by, Malay Mail.
The government’s goal is to reduce its fiscal deficit from 5% in 2023 to 4.3% of gross domestic product (GDP) in 2024. In order to achieve this goal, Rafizi said, the government plans to phase out the distribution of blanket subsidies, especially for RON 95 petrol, which accounted for the majority of the RM81 billion spent by the government last year.
Once the blanket subsidies for RON 95 are removed, what will be the price of petrol at the petrol kiosk?
According to Paultan.org, the price of unsubsidised fuel sold in Perlis since last February for foreign-registered vehicles might hold the answer.
At two specialized stations in Padang Besar and Wang Kelian, the non-subsidized RON95 petrol is priced at RM3.38 per liter, while diesel is sold at RM3.45 per liter.
Currently, RON 95 is sold at RM 2.15 per liter, while diesel is sold for RM 2.15 per liter.
If the price of fuel is floated to the Perlis rates, then this would increase the price of petrol and diesel by a whopping 65 percent and 60 percent respectively!
However, when we read between the lines of Rafizi’s statement, we can see that a drastic increase in the price of petrol is unlikely.
In acknowledging the broad-based inflationary effect that the floating of the price of petrol might incur, Rafizi Ramli has stated that the government must “manage the sequence” of the reduction of subsidies, indicating that the increase in the price of fuel is likely only going to be gradual, with the subsidies being cut in a phase-by-phase manner.
Nehru Sathiamoorthy is the author of “While Waiting for the World to end”. He was a columnist at FMT and a frequent contributor to the South China Morning Post, The Star, Malaysia-Today, MalaysiaNow, MalaysiaKini and Focus Malaysia.
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