Diesel prices soar as Malayisan government cuts subsidies

KUALA LUMPUR

Diesel price in Malaysia jumped by more than 50 percent yesterday as part of a revamp of decades-old fuel subsidies to tighten government spending and save billions of ringgits annually.

The restructuring eliminates blanket energy subsidies and redirects them to the needy. They're part of economic reforms pledged by Prime Minister Anwar Ibrahim, whose government says they're needed to build and more sustainable economy and plug losses from smuggling cheap oil to neighboring countries.

Anwar has been cautious to bring about higher fuel prices, however, with working-class voters are still struggling with rising cost of living.

He announced the decision to cut fuel subsidies last month to give time to lower-income groups to prepare for the transition.

The government eventually plans to follow suit with more petrol subsidies. Essentials including fuel, cooking oil and rice are heavily subsidized in Malaysia which have strained national finances for years.

Second Finance Minister Amir Hamzah Azizan announced on June 9 that diesel price will rise to 3.35 ringgit ($0.71) a liter, up 56 percent from its previous subsidized price of 2.15 ringgit ($0.46). He said the price will be reviewed on a weekly basis to be aligned with market prices.

Despite the hike, Amir said Malaysia’s diesel price remains among the lowest in Southeast Asia. 

Amir said the targeted subsidies will help cut the fiscal deficit, with the government expected to save at least four billion ringgit ($850 million) annually. Malaysia's diesel subsidy bill surged from 1.4 billion ringgit ($300 million) in 2019 to 14.3 billion ringgit ($3 billion) last year.