KUALA LUMPUR, Dec 4 — The implementation of targeted subsidies does not increase national debt but is instead an important strategy to reduce long-term liabilities, stabilise the fiscal position, and strengthen investor confidence in Malaysia’s economic prospects.
The Finance Ministry (MOF) said savings from this targeted subsidy will be used to improve the people's well-being and fund the development of educational, health, and public transport facilities in the country.
RON95 petrol subsidy rationalisation is one of the government's initiatives to ease the burden on the people and increase the efficiency of spending and the distribution of the country's financial resources.
The government is expected to generate savings of RM2.5 billion to RM4 billion per year based on domestic consumption data and the assumption that around 20 per cent of the total RON95 consumption currently involves consumers who are not eligible for subsidies.
“The range of savings takes into account various scenarios of global crude oil prices between US$60 and US$80 per barrel, as well as the implementation of subsidy removal on non-targeted segments such as foreigners and commercial consumers,” it said in a reply to the Dewan Rakyat posted on the Parliament website today.
The MOF added that the targeted subsidy approach has the advantage of avoiding a sharp increase in inflation compared to raising the price of RON95 to the market price for all, with inflation expected to remain below two per cent in 2025 and 2026.
“It also helps accommodate different levels of RON95 usage among citizens with different daily travel distances,” it said.
The government is committed to adopting a prudent and responsible fiscal approach, with targeted subsidies expected to strengthen the country's fiscal position without increasing debt and to ensure that benefits are channelled more effectively.
The MOF was responding to Pandan MP Datuk Seri Mohd Rafizi Ramli's query on the estimated cost savings and annual implementation expenses for 2025, 2026, and 2027 for the RON95 subsidy programme.
He also enquired as to how the savings will be utilised and which allocations will be increased using the savings, as well as the percentage of improvement in the country's fiscal deficit.
