Fuel Subsidy Review?
February 2008
Malaysia is likely to review its massive fuel subsidies in light of record oil prices. In 2006, direct fuel subsidies amounted to RM15bn (£2.35bn) or 2.6% of gross domestic product. In the first eight months of 2007, Malaysia spent RM16bn (£2.51bn) on petrol subsidies. The hefty fuel subsidy jeopardises the Government's fiscal deficit target of 3.1% of GDP in 2008. As a solution, economists anticipate a 15%-20% rise in pump prices sometime in 2008, probably post-election, which would raise the price of premium petrol to about RM2.30-RM2.40 (£0.36-£0.38) from the current RM1.92 (£0.3) per litre. Cutting the subsidy would mitigate the fiscal deficit but higher petrol prices risk stoking inflation.
Malaysia is likely to review its massive fuel subsidies in light of record oil prices. In 2006, direct fuel subsidies amounted to RM15bn (£2.35bn) or 2.6% of gross domestic product. In the first eight months of 2007, Malaysia spent RM16bn (£2.51bn) on petrol subsidies. The hefty fuel subsidy jeopardises the Government's fiscal deficit target of 3.1% of GDP in 2008. As a solution, economists anticipate a 15%-20% rise in pump prices sometime in 2008, probably post-election, which would raise the price of premium petrol to about RM2.30-RM2.40 (£0.36-£0.38) from the current RM1.92 (£0.3) per litre. Cutting the subsidy would mitigate the fiscal deficit but higher petrol prices risk stoking inflation.
posted by Toyers at
1:37 AM
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