KUALA LUMPUR (April 3): The upcoming subsidy rationalisation by the government needs to be properly communicated to the public when it is ready to be rolled out, said Bank Muamalat chief economist and social finance, Mohd Afzanizam Abdul Rashid.

Reforms such as rationalisation of subsidies could “face challenges” without proper communication, the economist said. Clarity on information related to such reforms would help people understand the implementation better, he added.

"Beyond social media, we need to be on the ground and talk with the people," Mohd Afzanizam said during the 2023 BNM (Bank Negara Malaysia) Governor's Address on the Malaysian Economy and Panel Discussion at the Asia School of Business, Kuala Lumpur.

"There is a communication gap," he added. "More of than not, we tend to use technical jargons which result in the message [being] lost."

Subsidy rationalisation — including the targeted diesel subsidy, on which a draft mechanism is expected to be ready by 2H2023 — is part of structural reforms mulled by the government in light of the country’s tight fiscal position.

The government is also looking at ways to increase federal government revenue and reduce federal government operating expenditure, while balancing its impact on the public's wellbeing amid rising cost of living.

In the bigger picture, Mohd Afzanizam stressed that “there is a need for a complete strategy” when executing such structural reforms “to avoid the economic shock on inflation and the price of goods”.

Commenting on the rationalisation of the existing fuel subsidy mechanism, Mohd Afzanizam cited how high-income earners are still benefitting from blanket subsidies, or how oil smuggling is still rampant and creates a leakage in the economy.

He added that the otherwise blanket subsidy can be better channelled for other developments, such as healthcare and education.

Going back to the communication aspect of the reform strategy, Mohd Afzanizam commended BNM for advocating financial literacy, such as its the use of social media to inform the public on key economic points.

"But again, financial literacy has a lot of aspects that need to be broken down and conveyed to its audience," he said. An example is basic economics, which should be part of financial literacy, he added.

When contacted by The Edge, Mohd Afzanizam said aside from BNM, the Credit Counselling and Debt Management Agency (AKPK), along with other financial institutions, such as the Employment Pension Fund (EPF), as well as universities play similar roles.

The society can be also educated on the time value of money where inflation affects purchasing powers, or why monetary policy plays a key role, especially on interest rates that can affect the growth momentum and to a large degree, return on investment, he added.