The RON95 gasoline subsidy needs to be gradually reduced in stages to avoid burdening the rakyat, the analyst said.

Decision of the Malaysian Government Reduce fuel subsidies this year is clearly the source of the debate, as it raises concerns it could lead to sharp increases in gas prices. To that end, one analyst has called on authorities to float RON95 fuel prices in stages to prevent price shocks that spook consumers and businesses.

Bank Muamalat Malaysia head of economic and social finance Dr Mohd Afzanizam Abdul Rashid said Berita Harian that when the fixed price of RM2.05 per liter for RON95 was introduced in September 2021, the gap between it and the unsubsidized RON97 was only about 30 sen per litre. That gap has widened to RM1.42 per litre, with RON97 now retailing at RM3.47 per litre.

“If we take this number as a sign of price adjustment for RON95, the large gap with RON97 needs to be narrowed. However, it needs to be done in stages to not cause sudden inflation,” he said.

Mohd Afzanizam added that Malaysia last experienced a sudden fuel price increase on June 5, 2008 when the RON97 price was floated, pushing prices up to 78 sen per litre. This caused inflation to spike to 7.7% that month, compared with 3.8% the previous month.

“There are a number of things that need to be watched when cutting benefits. The first is the level of fuel price increases needed to reduce subsidy costs, which ideally should not be too drastic. Second is the frequency of price increases.

“Hence the use of the Automatic Pricing Mechanism (APM), where new RON95 gasoline prices are announced weekly. [as it is currently], could be the solution. With this approach, the rakyat can plan their finances better,” Mohd Afzanizam said, adding that enforcement needs to be strengthened to prevent businesses from skyrocketing commodity prices.

Not everyone is on board with the idea of ​​a managed float. Professor Madya Dr. Aimi Zukhazmi Abdul Rashid, economic analyst at UniKL Business School, said that gradually increasing fuel prices will not solve the problem of rising inflation rates.

According to him, there will be businesses that will take advantage of the situation and increase the price of goods many times, citing the gradual increase in gasoline prices. There is also an enforcement problem as there are not enough government agency staff to monitor every station in the country, especially with regard to purchasing controls and mechanisms at the stations.

Therefore, Aimi Zukhazmi believes that the price of RON95 gasoline should be floated immediately to match the market price, not in stages. “Just raising prices once will make it easier to coordinate price increases of other products because some items such as sugar are still subsidized by the government.

“Such a sudden increase [in fuel prices] will be a cause for concern, as crude oil prices continue to rise due to the crisis in the Middle East. Even so, staggered price increases will not be enough to achieve the government’s goal of reducing the fiscal deficit and national debt,” he added.

Additionally, the Kedah Consumer Association has warned the government that withdrawing fuel subsidies could cause a domino effect on the economy and economy. rakyatlivelihood of New Straits Times report. Chairman Yusrizal Yusoff said that rising fuel prices could cause high-income business operators to increase the prices of goods and services, which would be passed on to consumers.

He also asked whether the government had any actual data on the amount of fuel used by Malaysians to ensure a fairer distribution of subsidies. Yusrizal said that as an oil-producing country, Malaysians have a right to enjoy fuel subsidies, adding that the government should focus on reviving the economy to counter the effects of the pandemic. COVID-19 epidemic, instead of withdrawing benefits.

This comes after confirmation from Economy Minister Rafizi Ramli Bloomberg This week the government plans to reduce fuel subsidies this year to address the fiscal deficit. As part of the plan, general subsidies for RON95 petrol, which make up the bulk of the country’s RM81 billion in total subsidies, will be scrapped.

Look at its website Double, a non-subsidized gas station in Padang Besar, Perlis to serve Thai motorists, shows that the current floating price of RON95 gasoline is RM3.47/liter, identical to the price of RON97. Meanwhile, diesel fuel has a retail price of RM3.46/liter.

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