Malaysia ends blanket diesel subsidies, shifts to market prices

Malaysia is implementing a major reform in its fuel subsidy system.

Diesel prices in Peninsular Malaysia will now be set at market prices, ending the government’s general subsidy program.

The changes are expected to save the government about $853 million annually.

Massive diesel subsidy costs that will reach 14.3 billion ringgit by 2023 are hurting the Malaysian economy.

In addition, cross-border smuggling of diesel is a major concern.

The government believes that these savings can be better channelled into development projects and social programmes.

However, the government acknowledges that these changes could cause problems for some groups.

To address this, targeted financial assistance will be provided to more than 30,000 individuals who rely on diesel vehicles.

In addition, assistance will continue to be provided in critical areas such as logistics, public transport and fisheries.

The reforms are part of a wider effort to improve Malaysia’s economic health.

The government aims to reduce inflation by phasing out all subsidies.

The central bank is closely monitoring the potential inflationary impact of these changes.

Although prices have fallen recently, removing subsidies could push them to 3.5 per cent this year.