Govt mulls gradual subsidy cuts to avoid backlash
Malaysia will hold a cabinet meeting on Wednesday to discuss plans that may see the struggling government coalition extend over five years plans to cut politically popular subsidies.
Free Malaysia Today
KUALA LUMPUR: Malaysia will hold a cabinet meeting on Wednesday to discuss plans that may see the struggling government coalition extend over five years plans to cut politically popular subsidies.
Three government sources said the meeting would likely adopt a longer timeline on reducing the subsidy bill in order to fend off a possible political backlash. The cost of subsidies has more than doubled since 2006 and the Southeast Asian country last year recorded its largest budget deficit in over two decades.
Analysts said a gradual approach could give Prime Minister Najib Tun Razak more room to manage voter discontent following the government’s record losses in 2008 polls and reassure investors let down by previous policy u-turns.
Najib has tasked a government thinktank to come up with a series of reforms to reduce Malaysia’s bill from food, petrol, electricity and gas subsidies. Those proposals presented had envisaged cuts starting in June, with price rises every six months over a five-year timeframe, the government sources said.
“The feeling here is that the June 1 timeframe may be too soon. It has to be done moderately and in stages,” said a government source.
The effect of price rises is likely to be offset by support payments for poorer Malaysians, said the sources, who declined to be identified.
The thinktank has put the total cost of subsidies at RM74 billion annually, although that includes social welfare, health and education transfers, according to advertisements placed in newspapers.
“One issue of concern is whether to cut all in one go, or sector by sector, and the timeline,” said a second source.
