THE government does not rule out the possibility of restructuring national expenditure, given that the burden of fuel subsidies has now reached RM5bil a month following the global energy crisis due to the blockade in the Strait of Hormuz.
The situation is also forcing the government to review the allocation of fuel subsidies and implement rationalisation of operating expenditure to avoid the deficit widening beyond the set target, he adds.
“The government is accelerating the transition to a more efficient targeted subsidy mechanism. This step is important to ensure public funds are used optimally while reducing the country’s financial burden caused by the surge in global crude oil prices.
“Nevertheless, this restructuring will be carried out carefully, in a targeted manner so as not to affect the momentum of the country’s domestic economy.
“This strategic approach is crucial in strengthening the nation’s fiscal space and ensuring the people’s well-being continues to be preserved, while enhancing the resilience of the national economy to face global economic uncertainty and mounting pressures,” he tells Sinar Harian.
Akmal Nasrullah adds that the government constantly reassesses national spending priorities based on several factors. These include current fiscal position, global and domestic economic developments, as well as the increasingly dynamic needs of the people to ensure the use of national financial resources is optimal and high-impact.
“In this regard, the country’s fiscal direction also emphasises strengthening fiscal space, prudent expenditure management, and ensuring the nation’s fiscal position remains sustainable.
“In the face of global economic uncertainty, inflationary pressures, geopolitical conflicts, and rising project implementation costs, the approach of restructuring or reprioritisation of expenditure is important to ensure national financial resources can be channelled to truly critical programmes and projects that deliver high impact to the people and the national economy,” he says.
Akmal Nasrullah adds that spending priorities will continue to be given to projects and programmes that are meaningful to the people’s wellbeing, economic growth and national resilience.
He states that this encompasses basic facilities, critical infrastructure, health, education, food security, flood mitigation, public transport and digitisation of government services.
At the same time, he says, the government must also ensure continuity in the implementation of physical development and infrastructure projects that have direct impact on national economic growth.
“The government will also focus on projects with high implementation readiness, that can be carried out immediately, are people-centric, and capable of stimulating economic activity and the overall well-being of the people,” he says.
When asked about the sectors most affected by the crisis, Akmal Nasrullah says the three industries most impacted are agriculture, manufacturing and services.
This is due to the input costs in the agriculture sector have risen, involving higher prices of fertiliser and animal feed, which in turn are expected to directly affect national food production costs if the global supply crisis persists.
“In addition, the closure of the Strait of Hormuz is also expected to affect the country’s manufacturing sector due to supply chain disruptions causing shortages of raw materials.
“This situation is further worsened by the sharp increase in logistics and insurance costs, with transportation costs reportedly rising nearly two-fold, while insurance premiums for a single voyage have surged up to 16 times due to the conflict,” he notes.
Akmal adds that based on the latest study by the Federation of Malaysian Manufacturers (FMM), micro, small, and medium enterprises (MSMEs) are facing sudden operating cost pressures due to the energy crisis and global supply chain disruptions.
On efforts to secure energy supply if the crisis prolongs, he says the government continues to strengthen national energy security in line with current developments and global geopolitical uncertainties.
“In terms of petroleum supply security, Petronas has activated a source diversification strategy by obtaining crude oil and petroleum products from various regions, including South America, West Africa,and Central Asian countries such as Turkmenistan and Uzbekistan, to reduce dependence on the strategic Strait of Hormuz route.
“This approach is also reinforced through direct Government-to-Government (G2G) negotiations, including with Australia for the supply of phosphate and fertiliser, as well as with China for resin and naphtha to support the country’s medical device industry.”
At the same time, Akmal Nasrullah acknowledges that the government understands the ongoing global economic uncertainty and current geopolitical conflicts are causing public concern, with regards to the cost of living.
He says the government will continuously monitor the situation closely and is prepared to take appropriate measures to safeguard the people’s well-being and ensure the national economy’s stability.
To strengthen national preparedness, Akmal Nasrullah says the government has implemented daily monitoring through the Global Supply Crisis Monitoring Dashboard, which tracks key indicators such as Brent crude oil prices, liquified natural (LNG), currency exchange rates, and developments in international supply chains so that intervention measures can be carried out more swiftly and in a targeted manner.
