Targeted fuel subsidy being worked on to replace current blanket subsidy, says Mustapa Mohamed –

Economy minister Mustapa Mohamed recently said in an interview with Bloomberg that the Malaysian government has begun work on replacing the current blanket fuel subsidy scheme with a more targeted approach. This is in light of rising government spending to deal with higher living costs faced by the rakyat.

“The target is to ensure that those who need subsidies, will get the subsidies. The sooner it is done, of course, it will relieve pressure on the government’s budget,” Mustapa said in the interview. A targeted subsidy will also apply to non-mobility essentials like cooking oil, the report stated.

Last Friday (June 3), the finance ministry said in a pre-budget statement that the government’s expenditure is expected to increase significantly by about RM30 billion due to unanticipated subsidies for fuel, cooking oil, chicken and eggs as well as a flood relief. More recently, on June 6, prime minister Ismail Sabri Yaakob said the total subsidy bill this year could exceed RM71 billion.

As for the how much the government is forking out to subsidise fuel, it was previously reported that the total bill is expected to hit RM28 billion for the whole of 2022, more than double the RM11 billion recorded in 2021. As per the latest fuel price update issued on Wednesday, RON 95 petrol and Euro 5 B10 remain capped at their ceiling prices of RM2.05 and RM2.15 per litre respectively, while RON 97 petrol hit a new record high of RM4.72 per litre.

Mustapa’s comments to Bloomberg reaffirms what he said back in April this year, although there’s still no indication when a targeted subsidy scheme will be implemented or how it will be done. We posed some possibilities in another post that touched upon international trade and industry minister Datuk Seri Mohamed Azmin Ali’s statement where he said, “those with a BMW cannot receive the same subsidies as those with Kancil.”

Given what we’ve heard from the government so far, a targeted fuel subsidy scheme is the (very near) future for Malaysia. Barring any backtracking, what do you think is the best method to implement such a scheme? Share your thoughts in the comments below.

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