Malaysia says higher revenue collection not enough to offset subsidy spike

MALAYSIA said on Friday an increase in government revenue from rising commodity prices was insufficient to offset an expected spike in subsidy spending this year.

Current geopolitical tensions had elevated fiscal risks, particularly from rising commodity prices, global supply chain disruptions and tightening monetary policy, the Finance Ministry said, as the country looks to prepare its 2023 budget.

The government expects subsidies on goods, particularly petroleum and cooking oil, to increase to 30 billion ringgit (S$9.4 billion), compared with 4 billion ringgit estimated in this year’s budget.

Going forward, the shortfall is expected to be cushioned by additional tax measures, as well as a more targeted approach to minimise leakages and ensure subsidies reach vulnerable groups, the ministry said.

The government will continue to intervene where necessary to mitigate sharp rises in the price of essential goods, and ensure food prices remain reasonable, it added.

Malaysia’s central bank expects headline inflation to average between 2.2 per cent and 3.2 per cent this year, with food costs up 4.1 per cent in April. Last month, the central bank unexpectedly raised its key interest rate to cool inflationary pressures. REUTERS