Malaysia's Prime Minister Anwar Ibrahim is defending his government's decision to end blanket diesel subsidies, saying that the move is necessary to save the country.

While recognising that the move to a targeted subsidy is not a popular one, Anwar said it would result in RM4 billion (S$1.1 billion) in savings each year, The Star and Bernama reported.

During a monthly address, Anwar told civil servants that previous governments before him agreed on the necessity of a targeted subsidy, but chose not to implement it due to the political risks involved.

"However, to save the country, we have no choice," he said.

Fuel prices in Malaysia are among the lowest in the world due to subsidies introduced in 1983.

Anwar said the move to a targeted diesel subsidy was implemented after exhaustive research at numerous levels.

Focus on assisting the people

"The funds from the targeted subsidy are not for increasing ministerial allowances or other interest; I focus on assisting the people," said Anwar, as quoted by Bernama.

Anwar said that the savings from the targeted diesel subsidy will be used to support public transportation.

"I told the Cabinet we need to make wise decisions, we must assist the majority of the people. We should not provide subsidies to the very wealthy, large industries, and foreigners," Anwar said, adding their responsibility is the Malaysian citizens.

Subsidised fuel does not necessarily benefit the needy as about three million litres of diesel is smuggled out of Malaysia daily, said Domestic Trade and Cost of Living Minister Armizan Mohd Ali, as reported by Free Malaysia Today.

Fuel smuggling costs Malaysia estimated daily losses of RM4.5 million (S$1.3 million).

At a Jun. 6 press conference, Armizan said his ministry was also targeting smuggling operations dealing in petrol and diesel along the Malaysian-Thailand border, where the changes to the diesel subsidy are already having an impact, Bernama reported.

Armizan said that smugglers were now increasingly smuggling RON 95 petrol instead of diesel, due to the announcement of targeted diesel subsidies, rather than blanket subsidies.

Price of diesel will be floated and set every week

On May 21, 2024, Anwar announced that Malaysia would implement targeted subsidies on fuel, starting with diesel.

At the start of this week, the price of diesel at all retail stations in Peninsular Malaysia was set at RM3.35 (S$0.96) per litre.

Subsequently, the price of diesel will be floated and set every week based on global market prices, to avoid price instability.

The subsidy changes do not affect East Malaysia, as prices for fuel in Sabah, Sarawak, and Labuan will remain at the subsidised price of RM2.15 (S$0.62) per litre.

Top image via Anwar Ibrahim/Facebook and Chee Keong Ang/Google.