Malaysia hikes fuel pices to trim budget deficit

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Malaysia petrolMalaysia increased the price of petrol (RON95) and diesel at midnight on September 2 by 0.20 ringgit ($0.06) to 2.10 ringgit and 2.00 ringgit, respectively.

The move is the result of a cut in fuel subsidies for the first time in nearly 2 years to save $1 billion annually as part of crucial budget reforms. However, the government is still be subsidising 63 sen for RON95 petrol, and the new prices are still lower than in most ASEAN countries. Before the cut, Malaysia spent $7.5 billion a year on fuel subsidies.

To address the burden of a higher fuel price on low-income people, the government said it will increase direct allowances and provider a comprehensive “social safety net” and further fiscal measures in the 2014 Budget.

“It’s a process of fiscal consolidation. The market will feel more confident if we can bring down our fiscal deficit,” Malaysia’s Prime Minister Najib Razak said.

Malaysia’s economy faces risks from rising domestic debt, a growing fiscal deficit and a shrinking current account surplus. The central bank recently cut the country’s growth forecast this year to 4.5-5 per cent, while Fitch Ratings lowered Malaysia’s credit rating outlook to negative from stable, citing a lack of fiscal reforms.

The budget deficit hit 4.5 per cent of gross domestic product in 2012, and the ringgit has shed more than 7 per cent against the US dollar in 2013.

Malaysia spends 24.8 billion ringgit a year on fuel subsidies.

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Reading Time: 1 minute

Malaysia increased the price of petrol (RON95) and diesel at midnight on September 2 by 0.20 ringgit ($0.06) to 2.10 ringgit and 2.00 ringgit, respectively.

Reading Time: 1 minute

Malaysia petrolMalaysia increased the price of petrol (RON95) and diesel at midnight on September 2 by 0.20 ringgit ($0.06) to 2.10 ringgit and 2.00 ringgit, respectively.

The move is the result of a cut in fuel subsidies for the first time in nearly 2 years to save $1 billion annually as part of crucial budget reforms. However, the government is still be subsidising 63 sen for RON95 petrol, and the new prices are still lower than in most ASEAN countries. Before the cut, Malaysia spent $7.5 billion a year on fuel subsidies.

To address the burden of a higher fuel price on low-income people, the government said it will increase direct allowances and provider a comprehensive “social safety net” and further fiscal measures in the 2014 Budget.

“It’s a process of fiscal consolidation. The market will feel more confident if we can bring down our fiscal deficit,” Malaysia’s Prime Minister Najib Razak said.

Malaysia’s economy faces risks from rising domestic debt, a growing fiscal deficit and a shrinking current account surplus. The central bank recently cut the country’s growth forecast this year to 4.5-5 per cent, while Fitch Ratings lowered Malaysia’s credit rating outlook to negative from stable, citing a lack of fiscal reforms.

The budget deficit hit 4.5 per cent of gross domestic product in 2012, and the ringgit has shed more than 7 per cent against the US dollar in 2013.

Malaysia spends 24.8 billion ringgit a year on fuel subsidies.

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