Targeting subsidies with technology

The current proposed petrol subsidy scheme may serve as a way to push more Malaysians towards digitalisation. By using ewallets to provide subsidies, the government can encourage the use of electronic payments not just for petrol but for other goods as well. — Filepic/The Star

Among the various announcements made during the Budget 2023 speech on Feb 24, 2023, in Malaysia, the one thing I expected to see – but in many ways didn’t – was how we would cut down on subsidies. In particular, it was earlier announced that there would be a “gradual move towards a more targeted subsidy mechanism”, yet the total allocated to subsidies in Budget 2023 amounted to RM55bil, more than the RM31bil in 2022.

The benefits of a targeted subsidy system are clear. Last year, Deputy Finance Minister Datuk Seri Ahmad Maslan highlighted in Parliament that the country’s top 20% income group, known as T20, received petrol, diesel, and LPG subsidies worth between RM15bil and RM17bil annually. This equates to approximately 30% of the RM50.8bil fuel subsidy as a whole.