Budget Reassessment Reasonable If Rising Fuel Subsidy Spending Persists -- Economist

By Norhayati Mohd Akhir

PUTRAJAYA, April 10 (Bernama) -- It would be reasonable to reassess the budget if the government continues to see a drastic increase in BUDI MADANI RON95 (BUD95) subsidy spending, according to an economist.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid noted that the current increase in subsidy spending from around RM700 million per month to roughly RM4 billion would warrant a reassessment if global energy price pressures persist.

“If the conflict continues, a budget adjustment is a possibility, and that is a normal part of fiscal management,” he said at a panel discussion at the Prime Forum on Islamic Affairs titled “United Front: Facing Global Challenges” here on Thursday.

For the record, the government had announced a budget revision in 2016 due to the 2014-2016 oil crisis, which affected national revenue and required restructuring of expenditures and fiscal priorities.

A similar approach was taken during the COVID-19 pandemic in 2020 and 2021, when the government introduced several economic stimulus packages, such as PRIHATIN, PENJANA, and PERMAI, to support people and businesses, which indirectly led to significant adjustments to the original budget plans.

In addition, in 2023, the government under Datuk Seri Anwar Ibrahim re-tabled a more targeted Budget 2023 after a change in administration, emphasising targeted subsidies and strengthening the nation’s fiscal position.

Yesterday, the prime minister urged the public to prepare for price increases expected in the near term following a global oil crisis triggered by the West Asia conflict.

Mohd Afzanizam said the current global energy crisis has driven up fuel prices, putting pressure on business costs and pushing up the price of goods, including the risk of profiteering.

“Therefore, there is a need for the government to monitor and enforce existing laws so that these unethical business practices can be curbed and prices can be controlled as much as possible,” he said.

The economist described the government’s measures to stabilise the national economy as prudent, particularly through targeted assistance and cautious use of policy space in response to global economic uncertainty.

According to him, efforts to strengthen the country’s fiscal position can be seen in the implementation of tax systems such as e-invoicing, digital taxation and subsidy rationalisation in recent years.

“The fiscal deficit has shown a downward trend from about 6.4 per cent in 2021 to roughly 3.7 per cent last year, reflecting improving financial management discipline.

“Malaysia is in a position of strength, but we are not immune to global shocks, which is why the government emphasises prudent spending and improvements to subsidy policy,” he said.

Mohd Afzanizam also stressed the importance of data-driven targeted assistance to ensure support reaches those who truly need it.

Meanwhile, Universiti Selangor president and vice chancellor Senator Datuk Prof Emeritus Mohammad Redzuan Othman said the government’s proactive approach to confronting global economic uncertainty includes implementing work-from-home arrangements to reduce transportation costs and fuel consumption, which are appropriate given the current circumstances.

He said the present economic uncertainty is a global issue, including the effects of disruptions in the Strait of Hormuz, which handles about 20 per cent of the world’s oil supply.

“That is why we see that when this route is disrupted, even for a short period, the effects are felt worldwide,” he said.

Mohammad Redzuan added that the experience during the COVID-19 pandemic also proved that approaches such as working from home and home-based teaching and learning can provide cost savings without undermining organisational operations.

-- BERNAMA