Malaysia sees first fuel price increase in a year
Prime minister aims to chip away at deficit
Malaysia raised fuel prices for the first time in more than a year as Prime Minister Najib Razak seeks to narrow the budget deficit.
The price of the widely used RON 95 grade of gasoline rose by 20 sen to 2.30 ringgit ($0.71) a litre last week, while diesel climbed by the same amount to cost 2.20 ringgit a litre, the government said in a statement.
Even with the increases, Malaysia said it will spend more than 21 billion ringgit ($7.3 billion) this year on fuel subsidies.
Najib has pledged to improve Malaysia’s fiscal position through cuts in subsidies and government expenditure, and by broadening the tax base. Inflation in Southeast Asia’s third-biggest economy accelerated at the fastest pace since 2011 earlier this year, and the central bank forecasts price gains will quicken with the implementation of a goods and services tax on April 1.
“The fuel price increase will help reduce leakage and smuggling activities by irresponsible groups,” the government said. “These measures will result in savings that can be put to more productive use, such as spending on education and health care, a better and wider public transportation system, and on the country’s security.”
Malaysia will increase cash handouts to low-income people under the BR1M program to help them cope with higher costs when the budget for 2015 is unveiled, the government said.
The inflation rate was 3.3 per cent in August, quickening from a 3.2 per cent pace in July. Malaysia’s central bank kept its benchmark interest rate unchanged last month after an increase in July.
Malaysia narrowed the fiscal deficit to 3.9 per cent of GDP in 2013, and Najib wants to further trim the gap to 3.5 per cent this year and three per cent in 2015, heading toward a balanced budget by 2020.