KUALA LUMPUR (July 4): The government should be able to foot the record high subsidy bill for 2022 using tax and non-tax revenues, said Maybank chief economist Suhaimi Ilias.
"It seems to me they are committed to continuing subsidies at least until the end of this year. As for how they are going to get the funding for it, I think the government does benefit from the strong commodity prices in terms of, for example, oil and gas related revenues," said Suhaimi.
Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz announced on June 30 that the projected consumption subsidy expenditure had reached RM77.3 billion so far this year.
He said the subsidies covered petrol, diesel, liquefied petroleum gas (RM37.3 billion), cooking oil (RM4 billion), flour and electricity to reduce people's cost of living, and subsidy bills (RM9.7 billion), social welfare assistance, including Bantuan Keluarga Malaysia (RM11.7 billion) and other subsidies (RM14.6 billion).
Suhaimi, speaking during a virtual media briefing, said that although surging crude oil prices have resulted in fuel subsidies ballooning to RM37 billion — compared to Budget 2022's initial allocation of RM4 billion — the elevated oil and gas revenues can offset half of the fuel subsidies.
"The [remainder] I think will have to come from higher Petronas (Petroliam Nasional Bhd) dividends to the government, which basically they can afford because there will be another sort of bumper year for them in terms of earnings, and profits," he said, adding that the higher-than-expected cukai makmur (prosperity tax) contribution also boosted Putrajaya's coffer."
Suhaimi said food-related subsidies may be funded by revenue gains from crude palm oil and other related taxes.
"So I think on that basis, the government can kind of foot the bill for subsidies. But [the] messaging from the government is very clear: Going forward they are reviewing the subsidies. The aim is for a more targeted form of subsidies as opposed to blanket subsidies enjoyed by all and sundry.
"I think [that is] what is going to happen next year which can help bring down the subsidy bill of the government, and I would say quite substantially as well," he added.
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