Malaysia's fuel subsidy cut sparks global economic debate

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PETALING JAYA: Rafizi Ramli, the Economy Minister, affirmed that the plan to eliminate universal fuel subsidies this year remains on schedule, aiming to alleviate the national fiscal deficit. 

He emphasized the necessity of strategically phasing out subsidies to mitigate the risk of inflationary pressures preceding their implementation, as discussed in an interview with Bloomberg on Tuesday.

Last year, Rafizi introduced the targeted RON95 subsidy program for the latter half of 2024, aiming to allocate resources more efficiently to those in genuine need. He underscored the unsustainable and inequitable nature of the prevailing situation, where the top 20 income percentile (T20) consumed 53% of blanket fuel subsidies. Notably, the lion's share of the RM81 billion subsidy expenditure in 2023 was attributed to RON95, the most widely utilized and affordable fuel variant.

Rafizi reiterated the government's commitment to redirect subsidies toward assisting the underprivileged while concurrently striving to narrow the budget deficit to 4.3% of GDP for the current year, down from 5% in 2023. He stressed the imperative of adhering to a specific timeline to achieve the fiscal target.

Despite the ringgit's recent decline against the US dollar, nearing its historical low since the 1997 Asian financial crisis, Rafizi expressed minimal apprehension, asserting that it hasn't adversely impacted foreign investor interest or impeded governmental aspirations. He maintained a positive outlook, stating that currency fluctuations are yet to impede the nation's long-term restructuring agenda.

Rafizi accentuated Malaysia's ambition to cultivate a premier start-up ecosystem globally, leveraging its inherent advantages to foster growth in technology and digital sectors. As part of this initiative, Khazanah Nasional Bhd aims to establish a 'super fund' in collaboration with other sovereign funds to bolster start-up investments, with the objective of attracting venture capital firms to Malaysia.

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