Govt Confident In Economic Targets Despite Diesel Subsidy Retargeting (Updated)

Finance Minister II Datuk Seri Amir Hamzah Azizan expressed confidence that Malaysia remains on track to meet its official inflation and economic growth forecasts for 2024, despite the implementation of the diesel subsidy retargeting initiative.

In his address to the Dewan Rakyat today, he stated that the government aims for a headline inflation rate ranging from 2.0% to 3.5% and anticipates a gross domestic product (GDP) growth between 4.0% and 5.0% this year.

Explaining the targeted approach to diesel subsidies, Datuk Seri Amir Hamzah Azizan highlighted measures such as providing subsidized diesel to the logistics sector and monthly cash assistance to individuals. These steps are designed to alleviate pressure on consumer goods prices and mitigate impacts on the public.

Despite projected savings of RM4 billion annually from the retargeting exercise, the government will continue to allocate up to RM10 billion for diesel subsidies.

This allocation includes RM3 billion for Sabah and Sarawak, RM4 billion for public transportation and logistics sectors in Peninsular Malaysia, RM2 billion for cash assistance to individual diesel vehicle owners and agri-commodity smallholders, and RM1 billion for subsidies benefiting fishermen.

On the Budi Madani initiative, Amir Hamzah reported that as of June 19, 2024, a total of 100,000 applicants in both the individual and agri-commodity categories had received approval.

“Of this, 76,000 applicants have received their RM200 monthly cash assistance as early as June 10,” he said.

He said that the government is committed to ensuring the best mechanisms are used to support business sectors and those eligible for assistance.

“Implementing diesel subsidy retargeting is not an easy decision. The government did not act hastily,” he said.

He explained that the initiative required cooperation from various agencies under the Finance Ministry, Domestic Trade and Cost of Living Ministry, Plantation and Commodities Ministry, Agriculture and Food Security Ministry, and Transport Ministry, as well as oil companies and other industry players.

He noted that the volume of subsidised diesel usage surged by about 80 percent, from 6.1 billion litres in 2019 to 10.8 billion litres in 2023, despite no significant increase in the number of new diesel vehicles over the same period.

Meanwhile, commercial sales of unsubsidized diesel fell by two billion litres during this time, he said.

“This huge growth in subsidised diesel usage was due to the large gap between commercial prices and the subsidized diesel retail prices at the pump in Malaysia,” he explained.

Previously, he added, subsidised diesel was sold at RM2.15 per litre, one of the lowest prices in the world, while the commercial price had reached RM3.50 per litre.

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