September 24, 2022
For most of 2022 we’ve heard that blanket fuel subsidies will soon be a thing of the past, but so far have not seen many outward facing steps to remove it. According to our Finance Minister, perhaps the government are reconsidering. Earlier this week while talking to members of the media at the 2022 Wild Digital SEA conference in Kuala Lumpur, Tengku Zafrul Abdul Aziz expressed the sentiment that it might “not be the right time” to implement targeted subsidies. Not the right time for targeted fuel subsidies  The reasons mentioned include the fact that the Malaysian economy is still in recovery from the pandemic while the inflation rate, at least compared to other countries, remains low. He stressed that the timing coupled with the correct execution is necessary to successfully implement such subsidies in a targeted manner. Additionally, the Minister also pointed to the instability with the price of crude oil, implying that the current high prices seen this year could well be a temporary spike: “If the (market) price of oil at that time is low, maybe there’s no need for targeted subsidy as the government can continue to give the subsidy.” Indeed it would be a waste of time and effort to abolish blanket subsidies only to implement its replacement scheme as the high price of crude oil is no longer a problem factor. Things can, for lack of a better phrase, return to business as usual. Aside from that, Tengku Zafrul also revealed that an additional dividend of RM25 billion by Petronas will be used for government expenditure as well as to cover the cost of fuel subsidies, which is expected to reach up to RM80 billion in 2022.

For most of 2022 we’ve heard that blanket fuel subsidies will soon be a thing of the past, but so far have not seen many outward facing steps to remove it. According to our Finance Minister, perhaps the government are reconsidering.

Earlier this week while talking to members of the media at the 2022 Wild Digital SEA conference in Kuala Lumpur, Tengku Zafrul Abdul Aziz expressed the sentiment that it might “not be the right time” to implement targeted subsidies.

Not the right time for targeted fuel subsidies 

The reasons mentioned include the fact that the Malaysian economy is still in recovery from the pandemic while the inflation rate, at least compared to other countries, remains low. He stressed that the timing coupled with the correct execution is necessary to successfully implement such subsidies in a targeted manner.

Additionally, the Minister also pointed to the instability with the price of crude oil, implying that the current high prices seen this year could well be a temporary spike: “If the (market) price of oil at that time is low, maybe there’s no need for targeted subsidy as the government can continue to give the subsidy.

Indeed it would be a waste of time and effort to abolish blanket subsidies only to implement its replacement scheme as the high price of crude oil is no longer a problem factor. Things can, for lack of a better phrase, return to business as usual.

Aside from that, Tengku Zafrul also revealed that an additional dividend of RM25 billion by Petronas will be used for government expenditure as well as to cover the cost of fuel subsidies, which is expected to reach up to RM80 billion in 2022.

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