Malaysia Overhauls Long-Standing Fuel Subsidies, Leading to Over 50% Hike in Diesel Prices

By Trisha Andrada

Jun 10, 2024 06:00 AM EDT

Diesel prices in Malaysia rose about 50% on June 10. (Photo : Mark Renders/Getty Images)

Malaysia's diesel prices surged by almost 50% on Monday, June 10, as a result of the government's renewed approach to fuel subsidies, which have been in place for decades, to reduce expenditure and save billions of ringgit yearly.

Diesel Rose to 3.35 Ringgit per Liter

This weekend, Second Finance Minister Amir Hamzah Azizan stated that diesel prices would increase to 3.35 ringgit ($0.71) per liter on Monday, as reported by The Associated Press. This is a 56% increase from the previous subsidized price of 2.15 ringgit ($0.46). He said the pricing would be evaluated weekly to ensure it is in line with market values.

Amir said there would be an exception for some logistic trucks and Malaysian states on the island of Borneo. Prevailing discounts for fishermen and a large variety of land-based public transportation vehicles (including school buses, taxis, and ambulances) will likewise stand.

According to government officials, those who qualify, such as smallholder farmers and those who own diesel cars, would also get monthly monetary assistance. They said that the increase would not cause significant price increases since subsidies would still be provided to certain individuals.

Amir said that, despite the increase, the price of fuel in Malaysia is still the second lowest in Southeast Asia, surpassing only Brunei.

With the targeted subsidies, the government may anticipate saving at least four billion ringgit ($850 million) each year, which would assist in reducing the budget deficit.

Millions of ringgit are being lost every year as a result of fuel smuggling in Malaysia. It would be more beneficial to invest in the country's development and the quality of life for its citizens, Amir said.

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Malaysia Revamps Fuel Subsidies

Under the new plan, energy subsidies will go to those who really need them. They are a component of the economic changes that Prime Minister Anwar Ibrahim has promised.

The administration has said that these measures are necessary to create a more stable economy and stop the loss caused by the illegal export of cheap oil to neighboring nations.

Anwar, who came to power in 2022, is taking a risk with this ambitious proposal that might enrage working-class people who are already feeling the pinch of the growing cost of living. Last month, Bloomberg reported he was giving low-income families more time to prepare for the shift by announcing the controversial decision to reduce gasoline subsidies.

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