Subsidy burden is expected to double this year - DPM

by DPM Tan Sri Muhyiddin Yassin

PUTRAJAYA - The subsidy burden is expected to double this year from RM10.32 billion to RM20.58 billion. The country could no longer maintain the current subsidies in remarks signalling the inevitability of price hikes.

  Yes, we are subsidising but we cannot sustain subsidies on the same amount. So there are ways in which we are trying to reduce subsidy costs like the increase in price of sugar. We are doing it in stages.

  Subsidy costs has also doubled from RM10.32 billion in 2010 to an expected cost of RM20.58 billion in 2011. RM18 billion is subsidy for petroleum-related sectors.

  Malaysia’s low purchasing power, coupled with rising prices, is putting pressure on the PM administration to pump more public funds into existing subsidies.

  The move is seen as necessary to avoid public unrest over the escalating cost of living, as well as to counter Pakatan Rakyat’s (PR) attacks on the government’s previous plans of phasing out subsidies.

  PM said on April 1 that the recent surge in the cost of living may force the government to slow subsidy cuts, and that while the government was committed to reducing the nation’s deficit, “we don’t want rising prices in Malaysia to be a major burden for the people.”

  He has already announced the government’s willingness to fork out an additional RM4 billion in addition to the RM10 billion allocated for subsidies this year.

  Analysts and politicians believe that problems affecting the economy — distorted and inefficient markets, lack of competition, low wages and a weak ringgit — will be the biggest problem for the BN administration as the country heads into the next general election, speculated to be held by year end.

  The government is now preparing the public for more cuts.

  We cannot guarantee there will be no increase in the prices of goods. We cannot control the prices but where the government can intervene to decrease public burden then we will.  

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a note: The 2010 Prices and Wages report by Swiss Bank UBS AG shows that residents in KL have only 33.8 per cent the purchasing power of their counterparts in New York, 42 per cent that of London, 33.7 per cent that of Sydney, 32.6 per cent that of Los Angeles and 31.6 per cent that of Zurich.