KUALA LUMPUR: The implementation of targeted diesel subsidies is not expected to have a significant impact on inflation and economic growth as the government has taken into account the rate of increase in diesel retail price and the cash assistance provided.
Therefore, the official 2024 forecasts for inflation and gross domestic product (GDP) growth remain at 2%-3.5% and 4%-5% respectively, said the Ministry of Finance (MoF).
“In principle, the government takes the approach of subsidy rationalisation while continuing to provide subsidies to groups that are in need, especially those with low to medium incomes,” MoF said in a written reply on the Parliament website.
The ministry explained that the retargeting of subsidies is intended to reduce leakages to groups that are not eligible to receive them such as foreign citizens, large private companies and high-income individuals.
Under the diesel subsidy retargeting, cash assistance to vehicle owners is only given to 300,000 individuals with assistance provided based on a single rate of RM200 per month, which is estimated to be sufficient for individual owners of diesel vehicles who mainly use pickup trucks.
“In contrast, the number of RON95 petrol consumers is larger, including owners of motorcycles and cars as well as e-hailing drivers. Therefore, if cash assistance is used as the ROM95 approach, it may differ from diesel,” MoF said.
— BERNAMA
