Economists say that the government should proceed with the implementation of its planned RON 95 petrol subsidy rationalisation despite the recent spike in global oil prices brought about by escalating tensions in the Middle East, The Star reports.
According to Sunway University economics professor Yeah Kim Leng, implementing the programme without delay will allow the burden of rising oil prices to be shared with consumers and businesses while preventing a ballooning subsidy burden to the nearly RM100 billion incurred in 2020 during the Covid-19 pandemic.
He said that unless absorbed by the government, higher global oil prices would lead to increased pump prices, putting pressure on national finances. “This would require the government to cut other expenditures or incur a higher fiscal deficit, which will further raise the country’s debt level,” he said, while suggesting that the rollout be accomplished in gradual fashion.
Echoing that sentiment was economist Geoffrey Williams, who said that higher oil prices would widen the gap between market prices and retail pump prices, increasing the government’s subsidy burden. He added that the government would save at least RM8 billion or more once it was in place, saving that can be redirected to critical areas such as healthcare, education and social protection.
He said that the rationalisation of diesel and electricity subsidies, which raised RM11.5 billion without triggering hostile market or public reaction. “The government must push through with targeted subsidies now. There is no better time and any delay will signal weakness and damage credibility,” he said.
until critical industry issues were resolved.
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