Malaysia: Fuel subsidies likely to top MYR28bn in 2022, says Tengku Zafrul

  • The government may have to fork out MYR28bn in fuel subsidies in 2022 if the price of crude oil continues to remain above USD100 per barrel, finance minister Tengku Zafrul Aziz said. He said MYR11bn was spent on fuel subsidies in 2021.
  • Tengku Zafrul said the conflict in Ukraine had caused the price of crude oil to rise to USD100 per barrel, the highest since 2014. With the price increase, he said, the subsidy rate for petrol, diesel and liquefied petroleum gas was expected to reach MYR2.5bn per month.
  • “Consumers at the moment only pay MYR2.05 for RON95 petrol, but the actual cost in Mar 22 has reached MYR3.70 per litre. This means the government has to subsidise the cost difference of MYR1.65 per litre.
  • “Every time we fill up petrol at the price of MYR100 for 49 litres, the government pays MYR81 because the actual price is MYR181 for 40 litres of RON95. This means the government’s subsidy is as much as 45% of the total price,” he said.
  • Meanwhile, for diesel, consumers only pay MYR2.15 per litre, while the actual cost has exceeded MYR4 per litre. He said the huge gap between the retail price and the market price would cause a much higher subsidy leakage risk caused by the smuggling of petroleum products.
  • Tengku Zafrul said the option of borrowing money to cover operating expenditure such as subsidy costs was not available to the government.
  • “Therefore, the increase in subsidy costs will have to be balanced with a revenue increase and expenditure savings,” he said. He said the current subsidy programme used the same pricing for the rich and the poor.
  • He said high-income individuals would enjoy more subsidies based on higher consumption rates compared to those earning less. The government would, therefore, be reviewing fuel subsidies to ensure they were targeted towards vulnerable groups.
  • “Targeted subsidies are expected to optimise the government’s financial resources while expected savings can be redistributed for more effective government programmes to benefit the people,” he said.

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