MALAYSIA has to review its subsidies bill and cut costs as the additional income from higher commodity prices is not enough to cover the subsidies bill, said Senator Tengku Zafrul Abdul Aziz.

“When Budget 2022 was tabled, we estimated oil price to be at US$66 per barrel and crude palm oil to be RM3,400 per metric tonne.

“But since March, oil price has gone up to more than US$100 per barrel while CPO is above RM6,000. Although this will give the government an additional RM10 billion in taxes, it is not enough,” the Finance Minister told Parliament during the Minister Question Time (MQT) session today.

As such, Tengku Zafrul said that the government has decided to review all the subsidy programmes and cut government expenditure.

“We have on July 14 told all government departments to cut overseas travel and imports,” he added.

The minister was responding to Wong Hon Wai (Bukit Bendera-PH) who asked how the government would fund the total subsidy bill which is expected to reach RM80 billion for 2022 and what kind of subsidy policy reform is being planned. 

Tengku Zafrul said petrol and gas subsidies are estimated to cost RM37.3 billion this year compared to RM13.2 billion in 2021 while cooking oil subsidies will hit RM4 billion (from RM2.2 billion).

“Other subsidies are estimated to be RM9.7 billion this year compared to RM1.1 billion the previous year,” he added.

But the finance minister denied that the government has cut any subsidies.

“The government has, in fact, introduced new subsidies for electricity, chicken and eggs.”

The government will not float petrol prices immediately after its targeted petrol subsidy mechanism is finalised.

“Petrol prices or RON 95 will not be increased immediately to market prices although it is now 50% below market price,” said Tengku Zafrul.

He said the government is still testing the mechanism and it will take another 3-6 months before it is ready. 

“We want to ensure it works in urban and rural areas. But when ready, it will be done in phases so that we do not create too much inflation or stop growth,” said the minister. – July 19, 2022.