Govt confident of achieving 2024 inflation, GDP forecasts even with diesel subsidy retargeting

KUALA LUMPUR: The government is confident that Malaysia will still achieve its official inflation rate and economic growth forecasts for 2024 even with the implementation of the diesel subsidy retargeting programme, said Finance Minister II Datuk Seri Amir Hamzah Azizan.

The government is targeting headline inflation of 2.0-3.5 per cent and gross domestic product growth of 4.0-5.0 per cent for this year.

“The approach taken in diesel subsidy retargeting is by providing subsidised diesel to the logistics sector and monthly cash assistance to individuals to reduce the pressure on consumer goods prices and impact on the people,” he said in his speech to explain about the targeted diesel subsidy implementation in the Dewan Rakyat today.

Therefore, he said, the government still bears up to RM10 billion for diesel subsidies despite saving RM4 billion a year as a result of the retargeting exercise.

This amount includes subsidies given in Sabah and Sarawak (RM3 billion), subsidies for the public transportation and logistics sectors in Peninsular Malaysia (RM4 billion), cash assistance for individual diesel vehicle owners and agricommodity smallholders (RM2 billion) and subsidies for fishermen (RM1 billion).

On the BUDI MADANI initiative, he said as of June 19, 2024, a total of 100,000 applicants in both the individual and agricommodity categories had received approval.

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

Amir Hamzah reiterated that the government will always take heed in ensuring the best mechanism is used in order to safeguard business sectors and those who are qualified for assistance.

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

According to him, it required the cooperation of 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 pointed out that the volume of subsidised diesel usage surged by about 80 per cent from 6.1 billion litres in 2019 to 10.8 billion litres in 2023 although there was no significant rise in the number of new diesel vehicles over the same period.

Meanwhile, commercial sales of unsubsidised diesel fell by two billion litres during the period, he said.

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

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