KUALA LUMPUR – A targeted fuel mechanism for the lower income group is expected to be introduced by the government to soften the impact of rising global crude oil prices.
Datuk Seri Mustapa Mohamed, Minister in the Prime Minister’s Department (Economy), said the government is still working on an appropriate structure and expects it to be finished shortly.
He further noted that the Finance Ministry is now determining whether the government can afford the cost of the targeted fuel subsidies and in the meantime, the prices of RON95 and diesel fuels will remain as it is for the time being.
“Those who can afford (the fuel) should pay more, while those who do not deserve (the subsidy) should not receive the subsidy at all. Subsidies are intended for the poor, especially the B40,” he stated during a programme aired at Bernama TV while adding that the issue is the timing of implementation of the targeted fuel mechanism.
Additionally, Mustapa highlighted that the fuel subsidies have been playing a critical role in containing price hikes in Malaysia as the government had kept the fuel price increase to between 2.0% to 3.0% over the last 10 to 20 years.
The subsidies, he said, will place a significant financial strain on the government’s budget.
“When we presented our budget last year, we previously estimated the subsidies at roughly RM5 billion. Currently, the estimate is around RM30 billion, a sixfold increase in the amount of subsidies,” he continued.
Apart from that, he stated that the oil subsidies included four items which are the RON95 fuel, diesel fuel, liquefied natural gas, and cooking oil.
Furthermore, Mustapa also explained that the increase in global crude oil prices has impacted the country’s inflation rate, with the Consumer Price Index (CPI) rising by 2.2% to 125.6 in March 2022. In comparison, the CPI for March 2021 was 122.9.
The average inflation rate between January 2011 to March 2022 is 1.9%.
He said that the government believes it will be a challenge moving forward as the primary impact is on prices.
“We have not updated our country’s growth projection and we remain committed to Bank Negara Malaysia’s 5.3% to 6.3% growth forecast for the year,” he stated.
Additionally, Mustapa further added that realistically, as this is a particularly difficult period, the country’s growth forecast may be reduced while the government will take all the necessary measures.
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