Revamped fuel subsidy system to be known soon

KUALA LUMPUR: The government is drawing up the specifications for the proposed revamp of the fuel subsidy system and expected to announce it soon, according to Minister in the Prime Minister's Department Datuk Seri Abdul Wahid Omar (pix).
"We're still going through (the fuel subsidy system) and there are various approaches that we're undertaking. We're drawing up the specifications and it will be done in due course," he told reporters at the Channel NewsAsia Business Insights Malaysia 2014 forum here yesterday.
Wahid said one of the approaches being considered is a targeted subsidy system that will ensure fuel subsidies benefit the low and medium-income groups. A targeted subsidy system would help reduce the subsidy burden as the current fuel subsidy system allows everyone to enjoy the subsidy regardless of their income level.
"The government is committed to fiscal consolidation and among others, subsidy rationalisation. We've started the ball rolling last year and efforts will continue. We're committed to reducing the budget deficit to 3.5% (of GDP) this year and 3% next year," said Wahid.
Malaysia's transformation into a high-income nation hinges, to an important extent, on the government's ability to achieve fiscal sustainability.
Wahid said inflation has been kept relatively low with the current level of 3.2% and the average for the first seven months was 3.3%.
"As we progress, it (inflation) very much depends on the fiscal consolidation and subsidy rationalisation that we're going to undertake. With GST (goods and services tax) coming into implementation in April 2015, we still believe the overall inflation can be kept below 5%. It's still manageable."
On concerns whether Malaysia is able to maintain the growth momentum in light of continued headwinds from global economic conditions and intense competition from emerging economies, he said the Malaysian economy is still resilient and recorded a strong growth of 6.3% in the first half of 2014.
"Judging from this encouraging growth performance, our economy is likely to exceed the 5.5% original growth forecast for this year. Moving forward, the Malaysian economy is expected to remain on a steady growth path. Focus is on strengthening the fundamentals of the economy to support short-term economic resilience and long term structural foundation," Wahid said in his keynote address.
Meanwhile, he is confident that Khazanah Nasional Bhd will be able to recover the RM6 billion investment that will pump into Malaysian Airline Systems Bhd (MAS) to restructure the ailing carrier.
"When executed well, Khazanah should be able to recover the investments, like what they've done in the case of the UEM group and many other investments," said Wahid.
He said there is a need to undertake a hard reset for MAS to be viable and from a government's perspective, it is supportive of the measures announced by Khazanah.