Move is part of plan to reduce fiscal deficit to 3% of GDP next year
The Straits Times, 2 Oct 2014
The Straits Times, 2 Oct 2014
PETALING JAYA - Malaysia has cut the subsidies for petrol and diesel, with the prices at the pumps increased starting today.
The announcement by Putrajaya yesterday, effectively a fuel hike, said that the new price for RON95 petrol will be RM2.30 (90 Singapore cents) per litre while diesel fuel will cost RM2.20 per litre - an increase of 20 sen for each.
Malaysia's Domestic Trade, Cooperatives and Consumerism Ministry said the government's move to reduce the current fuel subsidy was in keeping with its subsidy rationalisation plan.
"This move is in line with the subsidy rationalisation plan by the government to ensure that the country's finances remain strong," the ministry said in a statement yesterday. "Despite the increase, the government will still need to spend more than RM21 billion on fuel RON95, diesel and LPG subsidies for this year."
The current unsubsidised market price for RON95 petrol is RM2.58 per litre, while that for diesel is RM2.52 per litre.
The ministry said the government also aimed to curb the further smuggling of fuel by irresponsible quarters and ensure that the current subsidy is not misused.
"The government will continue to implement the subsidy rationalisation in stages so as not to burden the lower-income group.
"We understand the fuel price increase will affect the economy and the people. Therefore, we will continue to provide incentives to the lower-income group to alleviate their burden," it added.
The Malay Mail Online reported that there will be an increase in cash handouts to low-income households to be unveiled during the 2015 Budget later this month, among other forms of financial aid.
The paper also cited other coming measures, such as aid for families with children in school and tax incentives. Malaysia's government has been trying to progressively reduce its fiscal deficit since last year, from 3.9 per cent of gross domestic product to 3.5 per cent this year and to 3 per cent next year, the Malay Mail quoted the ministry as saying.
Malaysian Prime Minister Najib Razak, chairing a meeting of the Fiscal Policy Committee in September last year, said that his government aimed to have a balanced budget by 2020.
Since then, Putrajaya has imposed tough cost-cutting measures to try to reduce its debts. Subsidies on fuel and sugar have already been cut, and hikes in electricity tariffs have been imposed.
The last time Malaysia raised fuel prices was in September last year, then its first fuel hike in two years. That move also came before the Budget announcement. It aimed to save the government RM3.3 billion in subsidies for this year and help lower its worryingly high Budget deficit.
Economists have said that the persistent deficit could make Malaysia vulnerable in a sharp economic downturn as it then would not have the funds to hold up the weak economy.
"It's a process of fiscal consolidation. The market will feel more confident if we can bring down our fiscal deficit," Datuk Seri Najib had said.
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