Economists tell why Malaysia urgently needs subsidy reforms

Economists say Malaysia should urgently implement subsidy reforms, especially for diesel and petrol, to fill the government’s coffers and make the allocation of federal funds more efficient.

Senior Lecturer Goh Lim Thye from the University of Malaya said government subsidies often lead to market distortions, leading to underutilization of government resources and encouraging excessive consumption of financial resources. It also weighs heavily on the government’s annual budget, he explained, limiting its ability to invest in other critical areas such as health and education.

“Fuel subsidies disproportionately benefit high-income households that use more fuel, making them an ineffective tool for social equity,” he said. he told FMT. Goh also pointed out that Malaysia’s national debt has reached 62% of gross domestic product (GDP) and is still rising, while Putrajaya wants to reduce its budget deficit – last year, the public expenditure reached RM91.4 billion, or billion RM5. % of GDP.

“This is partly due to budget and aid. This year, Malaysia wants to reduce its budget deficit to 4.3% of GDP; providing financial support will play an important role in achieving this goal,” he said.

Bank Muamalat Malaysia Bhd Chief Economist Afzanizam Abdul Rashid said these targeted subsidies will reduce financial aid to the rakyat, with more than half of fuel subsidies benefiting those in the T20 with high incomes. He added that the aided fuel has gone to smugglers and foreigners, when it should have been Malaysians.

“The country needs money to develop its own economy. Therefore, the government cannot afford any kind of waste, because it represents a free opportunity where the money should be used for the benefit of its citizens.

“The donation will generate funds that can be used to distribute financial aid directly to those who deserve it, such as those who will benefit from Rahmah’s aid program and early school aid.”

Afzanizam also said that the aid fund will provide a large amount for education, health services and infrastructure, thus helping to boost national production in the near future, thus producing economic benefits. Nazari Ismail of University Malaya said that the fact that the government has no money to pay all people for all, the national bill increases each year.

He understands that the release of the help is a great decision among the rest of the government to get back to political and the price of goods and services. “We need to understand that the money saved from fuel subsidy lending will allow the government to prioritize its spending and ensure that it really helps those who need help. »

Prime Minister Anwar Ibrahim announced on May 21 that the Cabinet has approved diesel subsidies targeted at Peninsular Malaysia, which will save about RM4 billion annually.

Anwar, who is also the finance minister, said that 10 types of public transport and 23 types of vehicles will continue to receive diesel subsidies. The Finance Ministry also launched a RM200 diesel fuel subsidy scheme for eligible people.

In February, Housing and Cost of Living Minister Armizan Mohd Ali said Malaysia was facing a loss of RM4.5 million per day due to the country’s three million liters of diesel per day.

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