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Malaysia to cut diesel aids, conserving $852 million yearly

Malaysia will start cutting fuel subsidies to strengthen its financial position starting with diesel, a move that will conserve about 4 billion ringgit ($ 852. million) every year, Prime Minister Anwar Ibrahim said on Tuesday.

Anwar has consistently vowed to shift away from blanket. subsidies to a targeted system that mainly assists low-income. groups.

Malaysia subsidises fuel, cooking oil, and rice, among other. items, but increasing commodity prices have seen that cost climb. in recent years, straining the federal government's coffers.

Anwar stated savings from aid cuts could be re-directed to. the clingy, consisting of cash assistance to eligible owners of. diesel lorries such as paddy farmers and little traders.

I caution that any targeted subsidy should not problem the. bulk of individuals, Anwar stated in a telecasted address.

The diesel aid reform will only include consumers in. peninsular Malaysia, he stated.

He did not offer a date when the subsidy cuts would take. effect, saying more details will be revealed later.

Malaysia is forecasted to invest 52.8 billion ringgit on. aids and social assistance this year, below an. estimated 64.2 billion ringgit in 2023, according to its budget plan. for 2024.

The move to targeted subsidies comes as Malaysia looks to. carry out labour reforms and take on stagnant incomes amidst increasing. costs.

Anwar this month announced a 13% hike in wage for civil. servants from December, and on Tuesday pledged to pursue a. proposed progressive wage policy and other steps to raise. earnings.

Anwar stated a capital gains tax on the disposal of unlisted. shares and other new levies introduced this year will see an. estimated 4.5 billion ringgit boost in tax earnings, while. electricity subsidy reforms are anticipated to create about 4. billion ringgit in savings.

Inflation is expected to tick up following the elimination of. blanket subsidies.

Malaysia's central bank jobs heading inflation to range. in between 2% and 3.5% this year, compared to 2.5% in 2023, after. taking into account the planned aid and price control. adjustments.

Malaysia recorded development of 3.7% in 2023, a sharp drop from. a 22-year high of 8.7% in 2022. In the first quarter, the. economy grew 4.2%, beating analysts' price quotes on the back of. greater household spending and a recovery in exports.