KUALA LUMPUR - The government is expected to increase its subsidy allocation next year on the back of rising oil prices, which could lead to higher subsidy for petroleum products, said Economy Minister Rafizi Ramli.
He cautioned that the country’s subsidy expenditure could go higher going forward amid rising global energy prices in the background, especially if the government is unable to minimise the gap between subsidised and unsubsidised diesel.
Crude oil price hit US$80 per barrel last month and analysts have raised their 2024 oil price forecasts up to US$100 per barrel.
"The amount that 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 Report earlier today revealed that the Federal Government spent RM55.443 billion on subsidies in 2022, which is an increase of 322.1 per cent or RM42.309 billion, against RM13.134 billion in 2021.
Subsidies for petroleum products recorded the highest at RM45.184 billion, or 81.5 per cent of the total expenditure.
Rafizi emphasised that the government has been spending on blanket subsidy that 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 price next year, he reiterated that the government should move quicker to avoid 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