The government may be set to spend more on fuel subsidies due to the rise in global oil prices, but these subsidies will be maintained so as to protect the rakyat from the impact of a sharp rise in inflation, said national budget office director Datuk Johan Mahmood Merican.

He said this commitment would be continued, taking into account the fact that the country is still in the early stages of recovery from the impact brought about by the Covid-19 pandemic, Bernama reports. “The government is maintaining the current subsidy policy to protect the people from price increases and disruptions to the food supply chain, even though the cost for the subsidies has increased considerably,” he explained.

Speaking on a Bernama TV programme earlier this week, he said that Malaysians would still be able to enjoy RON 95 petrol at a capped price of RM2.05 per litre, which is one of the lowest prices around compared to oil-producing countries such as Saudi Arabia as well as neighbouring countries. Without the subsidy, the fuel would already be touching RM4 per litre. Presently, the price of RON 97 is RM4 per litre.

While rising oil prices are generally positive for a net oil and gas exporting country like Malaysia, the country will pay more in fuel subsidies than whatever it gains from revenue when prices climb.

Last week, it was reported that the government is on track to spend RM28 billion in fuel subsidies for petrol, diesel and liquefied petroleum gas (LPG) this year if the price of crude oil continues to remain above US$100 per barrel. This is five times higher than the RM5.3 billion allocated under Budget 2022.

Earlier, finance minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz had said that the government was looking into the possibility of the current fuel subsidy mechanism being reviewed in favour of a targeted approach for those in need. Presently, the same subsidised prices are enjoyed by everyone, regardless of income, and the high-income groups stand to benefit more from the subsidies based on their higher consumption levels compared to those earning lower incomes, he had said.