KUALA LUMPUR: The government must look into different types of strategies to prevent government expenditure on subsidies to continue ballooning and subsequently lead to an unsustainable financial standing.
Bank Muamalat Malaysia Bhd chief economist and head of social finance Mohd Afzanizam Abdul Rashid said a subsidy rationalisation should be the main priority.
This has to be done to ensure that the amount spent for subsidies does not grow further as it has reached a more than 300 per cent increase last year, he said.
"The rationalisation of subsidies would make financial aid to become more targeted as only those who are qualified can receive such assistance.
"With the Central Database Hub (Padu), the government will have more insights as to whom the cash assistance can be disbursed to. Otherwise, subsidies will keep on ballooning, making the government's financial position unsustainable," he said.
Earlier today, the federal government's 2022 financial statement revealed that Putrajaya spent a total of RM62.11 billion in subsidies last year with the bulk or RM55.443 billion in subsidies were charged to the federal government's operating expenditure (opex), while part of the subsidy spending for petroleum products and cooking oil amounting to RM6.67 billion were charged to the Covid-19 Trust Fund.
Economist Prof Emeritus Dr Barjoyai Bardai said the government must look into a gradual strategy to cut subsidies.
"There are eight million households that used to be getting subsidies. This year, when the budget is announced, and if subsidies are cut off entirely, they will regard the government of being cruel to them.
"We have to cut the subsidies gradually and we have to come up with an overall strategy."
He added that targeted subsidies was among things the government could adopt.
Meanwhile, Universiti Tunku Abdul Rahman economics professor Wong Chin Yoong said Malaysia should not segregate subsidy eligibility based on social class as this would be unfair.
When citing an example, he said the T20 group are among the most important contributors to the economy and government revenue, and it would be unfair if they were sidelined and unable to enjoy government's subsidies.
In June, Prime Minister Datuk Seri Anwar Ibrahim said the government was working on implementing targeted subsidies as soon as possible.
Economy Minister Rafizi Ramli had also said that the government was expected to save at least US$1 billion (RM4.73 billion) to US$2 billion (RM9.47 billion) a year from its shift to targeted subsidies, which could begin as soon as the second quarter of 2024 through Padu.