KUALA LUMPUR: Economist Dr Geoffrey Williams said petrol and diesel subsidy cuts need to be done "slowly" to manage its impact on inflation and the economy.

He was commenting on news reports that the government will proceed with petrol and diesel subsidy cuts this year. to meet its fical deficit target of 4.3 per cent for the year.

Williams said with petrol and diesel subsidies constituting the largest portion of the very high subsidies bill, cutting these subsidies is the only way to achieve a significant impact.

"The petrol and diesel subsidies will be cut in stages beginning with diesel for non-commercial customers.  "This will have least impact on the economy and on inflation," he told Business Times. Williams is of the opinion that subsidy cuts on RON95 may be delayed if oil prices rise due to the current tension in the Middle East. 

"Targeted subsidies can free up RM5.3 billion to RM9.2 billion for extra social spending directed to where it is needed. So this is essential," he said.

Economy Minister Rafizi Ramli reportedly said the government is sticking to diesel and petrol subsidy cuts this year and looking at managing the sequence of subsidy cuts with the risk of inflation picking up even before they are implemented.

Last year, Rafizi announced plans to introduce a new RON95 petrol subsidy programme in the second halof this year to replace the existing blanket policy.

https://www.nst.com.my/business/economy/2024/04/1039104/economist-says-diesel-and-petrol-subsidy-cuts-need-be-done-slowly