Global economic headwinds could halt RON95 subsidy plan - Economist

SHAH ALAM – The government's proposed RON95 fuel subsidy rationalisation, initially slated for mid-year, may be delayed until the trade negotiations between the United States and China are fully resolved.

Malaysia University of Science and Technology (MUST) economics expert Professor Emeritus Dr Barjoyai Bardai stated that implementing targeted subsidies in the near term would be impossible.

"I foresee the possibility of the government postponing the implementation of RON95 fuel subsidy rationalisation if the global economic situation becomes suddenly serious after the next 90 days.

“If the US proceeds with its previously announced plans regarding new tariff rates and if the whole world is hit by an economic downturn, we’ll see price hikes, a crash in our stock market, the ringgit depreciating.

"If that happens, the government will be forced to delay the plan.

"However, I believe the plan will still be pursued, especially following the positive outcomes seen after the diesel subsidy rationalisation," he told Sinar.

It was reported on Monday that the Cabinet has handed the decision regarding the RON95 fuel subsidy rationalisation proposal entirely to the Finance Ministry (MoF).

Economy Minister Datuk Seri Rafizi Ramli confirmed his ministry had discussed the matter with the Cabinet four times and is now awaiting updates from the ministry led by Prime Minister Datuk Seri Anwar Ibrahim.

When asked if the Central Database Hub (Padu) application system would still be part of the rationalisation plan given the change in the managing ministry, Barjoyai suggested it might not utilise data from the new system.

He based this view on the low number of Malaysians currently registered in Padu, which makes comprehensive data collection challenging.

“I don’t think Padu can be used yet, because only around eight million people have filled in their information. There are still about 20 million who haven’t. If the government proceeds with this targeted subsidy plan, they may have to rely on third-party data sources like the Inland Revenue Board (LHDN) and the Employees Provident Fund (EPF),” he said.

On the appropriate timing for implementing the subsidy targeting, Barjoyai believes it can still be done this year, given the positive developments observed after the diesel initiative.

“There’s no denying that many were sceptical when the diesel subsidy rationalisation was implemented, but now a lot of people are praising the government's move. The economy is really a study of perception. If we can manage perception well, God willing, it will have a positive impact too,” he added.