KUALA LUMPUR (Oct 7): The government has reduced the allocation of subsidy and social assistance to RM42 billion in Budget 2023 compared with RM58.9 billion in 2022.

However, the Ministry of Finance has revealed over the months that the country’s susbidy bill has ballooned to RM77 billion in 2022.  

The smaller allocation hinges on the expectation of lower average crude oil prices of US$90 per barrel in 2023, plus the government’s plan to gradually introduce targetted subsidies in ensuring economic efficiency and equitable distribution of resources, according to the Economic Report 2022/2023 released by the Ministry of Finance (MOF).

This year’s average Brent crude price is about US$102/barrel till Oct 6.  

Lower subsidies and social assistance are expected in the areas of fuel, agriculture-based subsidies, cash and welfare assistance, toll compensations, as well as education-related assistance.

Fuel subsidies account for 45% of the allocation in 2021, followed by education (12.5%), welfare (9.6%), agriculture (6.9%), transport (6.8%), and basic necessities (4.4%).

Since 2021, subsidies and social assistance spending has surged, particularly for fuel and cooking oils, driven by higher commodity prices. 

Despite the reduced allocation in 2023, the government said in the report that it will continue to extend other means of support to the rakyat through Bantuan Keluarga Malaysia (BKM), which is aimed at easing the financial burden of the lower income group.

Since 2000 until 2021, the government has spent more than RM485 billion on these programmes, with an average of RM22 billion each year.

Read more stories from the Economic Report 2022/2023 here.