Economy Minister Rafizi Ramli has confirmed that the government is on track to remove the blanket petrol subsidy this year as it seeks to reduce the national fiscal deficit and concentrate on aiding the poor and those who truly need it.

“We are sticking to it,” Rafizi said in an interview with Bloomberg, although he stressed that the government has to “manage the sequence” of the subsidy cuts. This is especially since there is already a risk of inflation increasing even before the cuts are implemented.

The government is looking to phase out the blanket subsidy for RON95 fuel in an effort to narrow its budget deficit from 5% of Malaysia’s gross domestic product (GDP) in 2023 to 4.3%. This category of subsidy accounted for a chunk of the RM81 billion that was spent on subsidies last year; aside from fuel, the government is also subsidising various other necessities for the people, such as cooking oil, thereby straining the nation’s coffers.

“In order to reach the fiscal target of 4.3%, a certain timeline has to be abided. Otherwise the dollars and cents will be off,” Rafizi was reported to have further said, although he did not share a specific timeline for the process.

The minister also reiterated that the current subsidy mechanism has primarily benefited T20 households, with the group making up 53% of the subsidy recipients. In response, the government is already working to come up with a new RON95 petrol subsidy programme to replace the existing blanket petrol subsidy, designed to be more targeted so that the assistance reaches the right audience.

For context, the government has been discussing the matter of targeted subsidies since the start of the Covid-19 pandemic, and has also carried out extensive studies for its implementation. Some approaches that have been proposed for the disbursement of the subsidy thus far include e-wallets and MySejahtera mobile app.

(Sources: The Star, Malay Mail)

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• Rafizi Ramli