Increasing subsidies hurting country financially

Dr Madeline Berma

KUCHING: The rise of crude oil prices has resulted in additional revenue for Malaysia but expenditure to mitigate the effects of the Covid-19 pandemic will put a strain on the country’s finance, says an economist.

Datuk Dr Madeline Berma pointed out that the government had allocated RM340 billion for the purpose.

“The allocation is a good move at a time when many are struggling to make ends meet, some have lost their jobs and some have experienced the loss of income during the pandemic.

“However, increasing subsidies will put a strain on the country financially.”

According to her, the rise of crude oil prices would benefit oil export earnings given that higher selling prices would bring in higher revenue.

“It’s estimated that every USD1 increase would translate into RM300 million in additional revenue for our country.

“Although this provides the government with fiscal space, the government still needs to manage its fiscal situation.”

Recently, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz announced that the allocation to cover fuel and cooking oil subsidies was up to RM8 bln.

He explained that it was RM4.22 bln higher due to the current global market prices.

Madeline said the subsidies from the government would reduce the cost of living due to an increase in price hike.

“It will act as a buffer against inflation and protect consumers from rising prices in other sectors.”