KUALA LUMPUR: The move by the government to raise the price of petrol and diesel by 20 sen is a step in the right direction towards prudent fiscal management while channelling savings from lower subsidies towards development purposes.
Economists said it also showed that the government was serious in reducing the deficit which would would bolster the country’s ratings which were recently downgraded by research houses while some said subsidy reduction should be extended to other products as well such as electricity.
Alliance Bank Malaysia Bhd Chief Economist, Manokaran Mottain, said the move reflected the government was serious about strategic policy reforms to raise competitiveness and improve its credit rating.
“We welcome the subsidy, although it is inflationary. We believe low income group will be offerred rebates to offset the rise in cost of livings,” he said.
In announcing the petrol price increase, Prime Minister Datuk Seri Najib Tun Razak, said the government would increase the BR1M payout or 1Malaysia People’s Aid in Budget 2014 to ease the burden on the low-income group following the reduction in petrol and diesel subsidy.
Manokaran said he was not surprised with the government’s move to reduce the fuel subsidy with the increase in the price of RON95 as something must be done to boost the economy after it had been downgraded by rating houses.
He added that the announcement should ease concerns in country’s ratings in recent weeks.
“Therefore, I believe that the action taken by the government will put the country in a better economic situation,” he told Bernama yesterday.
“As we know that subsidies are supposed to help the low-income group. Since the government already has the statistics of the low-income group in Malaysia, the government can help by giving them rebates and such,” he said.
A former banker said government should not only reduce the subsidy on petrol, but also look on the other major subsidies such as electricity.
Sources said that the government paid out a staggering RM30 billion in subsidies for a variety of products and services which if gradually phased out should make the economy more efficient. — Bernama