The Malaysian government is set to increase diesel fuel prices by 50 per cent in an effort to move away from costly blanket subsidies and towards a targeted approach that helps those in need. This shift is expected to save around RM4 billion annually, which will be redirected to low-income groups. Diesel subsidies have surged in recent years, with the subsidy bill increasing tenfold from RM1.4 billion in 2019 to RM14.3 billion in 2023.
The Finance Ministry announced that diesel fuel prices will be raised to RM3.35 per litre in Peninsular Malaysia, aligning them with market prices. Subsidised prices will still be available for certain groups, such as fishermen, land public transport vehicles, small-scale farmers, and commodity smallholders. The government plans to provide cash assistance to eligible individuals owning diesel vehicles to help mitigate the impact on their incomes. Diesel prices in Malaysia will remain among the lowest in Southeast Asia, with prices in Singapore, Indonesia, and Thailand significantly higher.
The government aims to curb smuggling to neighboring countries and misappropriation in sectors not eligible for subsidised diesel by implementing targeted subsidies. Malaysia’s second finance minister, Amir Hamzah Azizan, emphasized the importance of re-targeting subsidies to those who are eligible to prevent losses for the people and the country. The government’s decision to strengthen the country’s financial position in the long run includes weekly announcements of diesel prices and ongoing monitoring to avoid price instability.
Overall, the move to increase diesel prices in Malaysia represents a transition towards more targeted subsidies that prioritize those in need while also aiming to prevent leakages and losses. The government’s decision to align diesel fuel prices with market rates is part of a broader strategy to improve the country’s long-term financial position and reduce the subsidy bill. By providing cash assistance to eligible individuals and implementing lower prices for specific groups, Malaysia hopes to mitigate the impact of the price increase on lower-income individuals and sectors. The government will continue to monitor the situation and adjust prices accordingly to maintain stability and prevent smuggling and misappropriation.
