THE government is expected to increase its subsidy allocation next year on the back of rising oil prices, which could lead to higher subsidies for petroleum products, Economy Minister Rafizi Ramli said.

He cautioned that the country’s subsidy expenditure could go higher going forward amid rising global energy prices, especially if the government is unable to minimise the gap between subsidised and unsubsidised diesel.

Crude oil prices hit US$80 (RM378.80) per barrel last month and analysts have raised their 2024 oil price forecasts up to US$100 per barrel.

“The amount we are paying now is actually small compared to what we will have to pay in the future,” Rafizi said on the sidelines at the launch of the 28th Malaysia Economic Monitor: “Raising the tide, lifting all boats” by the World Bank today.

The Auditor-General’s Report earlier today revealed that the federal government spent RM55.443 billion on subsidies last year, which is an increase of 322.1% or RM42.309 billion, against RM13.134 billion in 2021.

Subsidies were highest for petroleum products at RM45.184 billion, or 81.5% of the total expenditure.

Rafizi emphasised that the government has been spending on blanket subsidy, which is no longer sustainable.

“This is at the expense of (those) who are supposed to get better protection and better help,” he added.

Commenting on the expectation of higher oil prices next year, he reiterated that the government should move swiftly to prevent a ballooning subsidy bill.

“Expectation of higher oil (price) means that we have to move quicker because even at (the average) US$80 per barrel, we are looking at a subsidy expenditure of around RM50 billion. So, if it goes up to US$100 per barrel, the subsidy bill will go (even) higher. And (as long as) there is a blanket subsidy, it will distort consumption,” he said. – Bernama, October 10, 2023.