Rafizi: Govt prepared for choppy waters when rolling back petrol subsidy

BUDGET 2025 | The government is prepared for choppy waters ahead over its commitment to rolling back petrol subsidies in mid-2025, said Economy Minister Rafizi Ramli.

In an interview with Bloomberg Television, he acknowledged that the politically sensitive pledge is likely to evoke a public backlash when it takes effect.

“It’s a once-in-a-generation decision that affects everyone’s lives.

“My hope, and our responsibility in the government, is to make sure that we manage this properly so that it is sustainable,” Rafizi (above) said, acknowledging that inflation is the government’s biggest concern even though only the top 15 percent income group will be subjected to higher RON95 petrol prices.

“It is the nature of the Malaysian economy that at any sign of a fuel price hike, you will start seeing the prices of everything else go up.

“Our simulation is that if there is a price hike, we have to go through at least a 12-month cycle before the inflation basically stabilises again to around two percent,” he added.

Majority to continue getting subsidised fuel

Yesterday, he said a two-tier pricing system will be introduced. Under this system, the top 15 percent income group, who are not eligible for subsidies, will pay the market price at petrol stations.

Rafizi pointed out that 85 percent of the population will continue to purchase fuel at subsidised prices when the targeted subsidy plan is implemented by mid-next year.

The minister assured that the government is reviewing the best mechanism to ensure effective implementation.

“The group that will no longer qualify for subsidies is what we refer to as the T15. We are in the process of defining exactly who falls into this category.

“For the remaining 30 million people, the mechanism is being fine-tuned and discussed for implementation,” he said.

The government hopes that the move can save RM8 billion and also convince investors that it is serious about fiscal reform.

The minister added that another option would be to float RON95 prices as was done with diesel in June and provide cash handouts to the needy to cushion the impact of higher costs.

However, the challenge then would be to ensure that it reaches the correct segments of the population.

Consumption tax not priority

Rafizi , who is also PKR deputy president, said the government’s focus will be on subsidy reforms and optimising spending before they can consider bringing back a consumption tax.

The interview also highlighted that Malaysia expects to sign a deal with Singapore on the special economic zone in Johor by December, with the first batch of investors expected to come in the first half of 2025.

The government has set aside an initial RM5 billion for an infrastructure facility fund it can quickly tap into for upgrading works in the zone.

Rafizi also said that Malaysia aims to grow its economy by at least five percent annually for the next few years and hopes that the ringgit can reach 3.8 against the US dollar if it can maintain strong growth over the next year.

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