Malaysia to remove diesel subsidies from Jun 10

MALAYSIA will cut blanket diesel subsidies from Monday (Jun 10), Second Finance Minister Amir Hamzah Azizan said, fulfilling a key pledge to improve the country’s finances.

Diesel will be sold at market prices that will be set weekly in Peninsular Malaysia, he said at a press conference in Putrajaya on Sunday. Retail diesel prices will remain subsidised in the states of Sabah and Sarawak in East Malaysia.

Malaysia expects the move towards targeted diesel assistance will save the government about RM4 billion (S$1.2 billion) a year, and has vowed to follow that up with unwinding blanket subsidies for RON95, the country’s cheapest and most commonly used petrol.

“Malaysia can ill afford to continue losing billions of ringgit to smuggling, which could otherwise be better spent to benefit Malaysians and developing our nation,” Amir said.

The government spent RM14.3 billion on diesel subsidies in 2023. 

The price of diesel will be set at RM3.35 per litre in Peninsular Malaysia, and remain at RM2.15 a litre in Sabah, Sarawak and the territory of Labuan.

More than 30,000 targeted individuals who use certain diesel vehicles will receive RM200 monthly cash aid in their bank accounts starting from Jun 10, Amir said. Certain logistics vehicles, public transport and emergency vehicles and fishermen will also be eligible to get subsidies under a targeted programme.

Prime Minister Anwar Ibrahim’s administration, which aims to trim this year’s fiscal deficit to 4.3 per cent of gross domestic product from 5 per cent in 2023, is under pressure to phase out broad subsidies as part of reforms closely-watched by investors.

Still, it has to consider the strain on household spending as well as on inflation.

SEE ALSO

Malaysia can hit target of 400 e-payment transactions per head each year before 2026: PM Anwar

Malaysia’s central bank expects inflation, which has been below 2 per cent since September, to average as much as 3.5 per cent this year should fuel subsidies for both diesel and RON95 be phased out gradually. BLOOMBERG