Unpopular but necessary to keep public spending in check - Putrajaya

The government decision in raising rates and cutting back subsidies are essential in keeping the economy strong and keeping public spending in check.

“In the short term, this will be unpopular with some. But it is absolutely necessary to maintain investor confidence in Malaysia – and to continue the strong growth in jobs and income over the last four years,” a Malaysian government spokesperson said in a statement, Thursday.

Petrol RON95 and diesel went up by 20 cents in September this year where petrol is now priced at RM2.10 per litre while diesel RM2 after the hike.

In Oct, the government had announced sugar subsidy cut while electricity tariff will see an increase of 15 per cent next year.

In the 2014 Budget presentation this year, Prime Minister Datuk Seri Najib Razak had also announced a goods and services tax (GST) beginning Apr, 2015.

The government said international institutions, investors and agencies have backed the approach and added that 52 per cent of respondents to the recent poll approve of the Prime Minister’s performance.

“Unlike the Opposition who promise everything to everyone, the government is taking the tough decisions needed to protect Malaysia’s economy,” the official said.

The government rationalised that although some measures may not be popular now but over the medium term what is good for the economy is also good for the people.

It also assured that despite the subsidy cuts, the poor and those who need help will never be sidelined.

“From Monday, some 7.9 million recipients in households earning under RM4,000 per month can apply for new BR1M payments. We are opening new 1Malaysia shops, to help with the cost of daily goods and new 1Malaysia clinics to provide affordable healthcare,” the official added.

The International Monetary Fund (IMF) which visited Malaysia from Dec 4 to 16 has also come out in support of the government’s decision to cut subsidies this year and introduce GST in 2015.

On Monday, IMF Mission Chief for Malaysia Alex Mourmouras had said that such decisions are “timely and comprehensive fiscal reform package”.

In a statement, Mourmouras said the subsidy cuts and GST will keep the country on track towards its aim of reducing fiscal deficit to three per cent by 2015 and to about zero by 2020.

He said that there is no need to wait for a crisis for structural reforms of the fiscal system to take place.