Gov’t needs to resolve issues before proceeding with RON95 subsidy rationalisation, say economic experts

The government needs to ensure that it learns from its diesel subsidy rationalisation initiative and resolve financial assistance as well as communication issues before proceeding with the introductuon of a targeted subsidy for RON 95 petrol, say economic experts.

While saying that the move towards a targeted subsidy for RON 95 was necessary for the country to better manage its finances, the academics said that Putrajaya should not rush into that implementation, and that preparation and transparent communication will translate to fewer hiccups when the time comes.

According to Putra Business School economic analyst associate professor Ahmed Razman Abdul Latiff, the registration of targeted recipients in the database must be efficient to ensure the smooth execution of the initiative.

“Communication about how it will benefit the intended recipients and transparency about the implementation process (is needed) as well,” he told the New Straits Times. He however cautioned that there could be an increase in the inflation rate, which could slow down domestic economic activities.

Meanwhile, University Kuala Lumpur business school economic analyst associate professor Aimi Zulhazmi Abdul Rashid said that the rationalisation of petrol subsidies should not be done this year.

He said this was because the impact of the diesel price increase and whatever knock-on effects hat would have had not been fully absorbed by consumers and traders. He said the 2025 Budget will be able to provide a true picture of the effects the targeted diesel implementation would have on the economy, especially in terms of the inflation rate.

Additionally, he said that the fluctuation in the value of the ringgit, which is expected to weaken until after the US presidential election is over, means any potential move should not be contemplated this year.

“It is very likely that US interest rates will not be lowered again and the value of the ringgit is expected to not strengthen, but rather weaken. The impact of the currency on imported food items, coupled with any increase in the price of RON 95, would be sure to push the inflation rate above Bank Negara Malaysia’s initial expectation of 3.5% this year,” he said.

This comes following economy minister Rafizi Ramli’s statement indicating that the government is studying the expansion of targeted fuel subsidies to incorporate RON 95 petrol. However, he said that the government’s primary focus was on rolling out diesel subsidies until the targeting of these subsidies stabilises and the leakage in subsidy distribution is reduced.

Looking to sell your car? Sell it with Carro.