TARGETED SUBSIDY DOESN'T INCREASE NATIONAL DEBT, SAVINGS UP TO RM4 BLN PER YEAR -- MOF

KUALA LUMPUR, Dec 4 (Bernama) -- The implementation of targeted subsidy does not increase national debt, but rather an important strategy to reduce long-term liabilities, stabilise the fiscal position and strengthen investor confidence in Malaysia’s economic prospects.

The Ministry of Finance (MoF) said savings from this targeted subsidy will be used for the well-being of the people and funding the development of educational, health and public transport facilities in the country.

RON95 petrol subsidy rationalisation is one of the government's initiatives to help ease the burden on the people as well as increase the efficiency of spending and distribution of the country's financial resources, the ministry said in a reply to the Dewan Rakyat posted on the parliament website today.

According to the MoF, 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,” the ministry said.

The ministry added that the targeted subsidy approach has the advantage of not causing 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 for 2025 and 2026.

“It also helps accommodate different levels of RON95 usage among citizens with different daily travel distances,” said the MoF.

The ministry said the government is committed to adopting a prudent and responsible fiscal approach, with targeted subsidy seen as able to strengthen the country's fiscal position without increasing debt and ensuring that benefits are channelled more effectively.

The MoF said this in response to a question from Datuk Seri Mohd Rafizi Ramli (PH-Pandan) who wanted to know the estimated cost savings and annual implementation expenses for 2025, 2026 and 2027 for the RON95 subsidy programme and 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.

-- BERNAMA