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Published: Friday September 28, 2012 MYT 4:42:00 PM

Economic Report 2012/2013: Subsidies to hit RM42.4b in 2012, decline in 2013

KUALA LUMPUR: Expenditure on subsidies is expected to reach RM42.4bil or 4.5% of GDP in 2012 but the government is taking steps to reduce it to RM37.61bil in 2013.

The higher expenditure on subsidies, which is an increase of 17% to RM42.4bil in 2012, is due to higher provision of fuel subsidies, compared with RM36.3bil or 4.1% of GDP in 2011.

However, total payments for subsidies in 2013 -- comprising of various subsidies (RM26.4bil); incentives (RM874mil) and social assistance programmes (RM10.4bil) -- is expected to be reduced by 11.3% to RM37.61bil from a year ago.

"This is not expected to impinge on the well-being of the rakyat, in particular, the vulnerable groups as the lower provision is for fuel subsidies (RM20bil)," according to report on the subsidies for 2013.

As for 2012, the Economic Report said the expenditure on subsidies accounts for 20.9% of the Federal Government's operating expenditure and comprises of various subsidies (RM31.50bil), social assistance programmes (RM10bil) and incentives (RM854bil).

"Allocation for fuel subsidy, the largest component in the category of subsidies is expected to increase 23.5% to RM25.2bil in 2012 (2011: 112.1%; RM20.4bil) on account of high refined petroleum prices as well as the one-off cash transfers and vouchers given to various target groups to ease the rising cost of living," it said.

The report said special financial assistance programmes cost the government RM3.2bil within the allocation for fuel subsidies.

Several measures continue to be implemented to contain price pressures. Subsidies for cooking ouil (RM1.5bil); toll rates (RM769mil); flour (RM150mil); provision of comprehensive rural air and rail services (RM195mil).

Subsidies for interest rate differentials amounting to be RM1.5bil will be provided for higher education student loans, microcredit scheme and to improve public transport in rural and urban areas.

The government will continue to give priority to initiatives to achieve food self-sufficiency and improve productivity in the food sector as well as stabilise prices of essential food items. A total of RM2.3bil will be spent on subsidies (RM1.5bil), incentives (RM854mil) to help farmers, fishermen and livestock entrepreneurs.

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