KUALA LUMPUR: The government must ensure lessons are learnt from the diesel subsidy rationalisation effort and resolve financial assistance and communication issues before proceeding with any RON95 subsidy rationalisation, say experts.

Putra Business School economic analyst Associate Professor Dr Ahmed Razman Abdul Latiff said, to ensure the smooth execution of the rationalisation, the registration of targeted recipients in the database must be efficient.

"Communication about how it will benefit the intended recipients and transparency about the implementation process (is needed) as well."

Razman said the move towards rationalisation of RON95 was much needed for the government to manage its finances to ensure fewer leakages and wastages on subsidies.

"The move is to ensure the more needy group will receive their deserved financial assistance," he said.

He also cautioned that there could be an increase in the inflation rate which could slow down domestic economic activities.

In a written reply to Parliament yesterday, Economy Minister Rafizi Ramli had said the government was studying the need to include RON95 in its subsidy rationalisation efforts.

However, he had said that for now, the government's primary focus was on rolling out diesel subsidies until the targeting of these subsidies stabilises and leakage in subsidy distribution is reduced.

University Kuala Lumpur's Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid, meanwhile, said the rationalisation of petrol subsidies should not be done this year.

He said this was as the impact of the diesel price increase had not been fully absorbed by consumers and traders.

"Apart from that, the enforcement authorities are also busy dealing with targeted diesel subsidies. Next year is more suitable because the targeted RON95 subsidy relates directly to the usage of the Malaysian," he said.

Aimi said the 2025 Budget will be able to provide a true picture of the targeted diesel implementation on the economy, especially the inflation rate.

He said this was in line with the fluctuations in the value of the ringgit, which is expected to weaken until after the US presidential election is over.

"It is very likely that US interest rates will not be lowered again and the value of the ringgit is expected to not strengthen, but rather weaken.

"The impact of the currency on imported food items, coupled with the increase in the price of RON95, would be sure to push the inflation rate above Bank Negara Malaysia's initial expectation of 3.5 per cent this year."

https://www.nst.com.my/news/nation/2024/06/1068684/experts-issues-need-resolving-ron95-subsidy-rationalisation