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Tuesday September 10, 2013 MYT 12:00:00 AM
Tuesday September 10, 2013 MYT 12:17:36 PM
PETALING JAYA: The cut in fuel subsidies last week was the first step taken by the Government to avoid a credit rating downgrade, says Minister in the Prime Minister’s Office Datuk Seri Abdul Wahid Omar.
He said more measures to boost the Government’s finances will be announced during the tabling of Budget 2014.
“It’s important for us to take the bold measures to rationalise subsidies and manage our finances better to make sure we continue to enjoy the current sovereign rating.
“We are hopeful of maintaining our credit rating. That will be a priority for the Government,” he said yesterday.
A downgrade in the country’s credit rating, Abdul Wahid said, can have serious repercussions on the economy.
Borrowing costs will go up and there will be a slowdown in foreign direct investments. The ringgit could weaken and the spillover effects are something the Government wants to avoid, he added.
Bank Negara recently trimmed the GDP forecast for 2013 to between 4.5% and 5% after the economy grew by 4.1% and 4.3% in the first two quarters of this year.
“In an environment where the GDP is lower than what was anticipated, the need to manage our spending becomes more urgent. That’s why we had to accelerate whatever rationalisation we had to have in terms of spending on subsidies and broadening the tax base,” he said.
Last year, the Government spent RM24bil in fuel subsidies, or 11.5% of its revenue.
“I think that’s not sustainable. When fuel is subsidised to that extent, it distorts the market and those who do not deserve the subsidy will enjoy them,” said Abdul Wahid.
“Cutting the fuel subsidy will see inflation rise by 0.3% but in a period when inflation is low at 2%, its impact can be contained,” he added.
Apart from cutting subsidies, the Government will increase the amount of money it gives out in its BR1M programme.
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Business, Wahid Omar, financial subsidies
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