KUALA LUMPUR: The government is confident that RON95 petrol subsidy rationalisation will not trigger a sharp rise in inflation, Ministry of Economy secretary-general Datuk Nor Azmie Diron said.
Inflation is expected to remain manageable within the government’s target range of 2% to 3% even as subsidy rationalisation progresses, he added.
“This is the aspiration we are studying, and we are confident. When we implemented the targeted diesel subsidy recently, we really looked at the impact on inflation. Was there a very high increase in inflation? It seems not,” he said at the Malaysian Institute of Economic Research (MIER) Brown Bag Talk titled “RMK13: Policy Empowerment to Sustain Economic Growth” today.
Responding to a question from the media, Nor Azmie said inflation should remain contained over the next six to 12 months despite the government’s ongoing reforms.
“If you look at the current situation, subsidies, rationalisation, RMK13 (13th Malaysia Plan) and so on, we will continue with the reforms.
“At the same time, our approach is targeted. If we look at last year, some of the reforms that were implemented did not lead to a significant rise in inflation. So we can still contain it. The target we set for inflation is around 2–3%, and so far, our performance remains within that range. So we are confident,” he elaborated.
Nor Azmie noted that while diesel subsidy rationalisation has already begun, the next phase, which is RON95, will have a broader impact.
He said the move is driven by fiscal realities, with petrol subsidies alone costing the government nearly RM40 billion a year.
“But does that bring benefits to the economy? It seems not. Our intention is to target it, and then the RM40 billion can be channelled into infrastructure development, healthcare, education, and so on,” he added.
Nor Azmie also highlighted that diesel consumption declined following the targeted subsidy, but industrial activity remained steady. “If we look at gross industrial activity, it has remained maintained. That means there were issues like smuggling and so on, and this is exactly the intention, efficiency of resources.”
