Malaysia Plans to Cut Subsidies in 2024 Budget to Support Low-Income Households
Malaysia to Prioritize Support for Low-Income Households
Malaysia is set to make subsidy cuts for the well-off and provide cash aid for the needy in its budget plan for 2024. This move comes as the country faces a global economic slowdown and fiscal strains. The government aims to prioritize support for low-income households amidst these challenges. Public finances are tight for Malaysia, which heavily relies on exports, and its growth is expected to moderate to 4%-5% this year, down from 8.7% in the previous year.
Prime Minister Anwar Ibrahim to Announce a Smaller Spending Plan
Prime Minister Anwar Ibrahim is expected to announce a smaller spending plan for 2024 when he presents the budget in parliament on Friday. Economists believe that this budget will focus on fiscal tightening with an emphasis on redirecting funds to households and sectors that are most in need. The government plans to reprioritize its spending to ensure fiscal resilience and attract investments.
Reduction in Subsidies and Measures to Alleviate Cost of Living
Prime Minister Anwar Ibrahim is also expected to announce cuts to electricity and petrol subsidies in the 2024 budget. Additionally, the government aims to introduce measures to alleviate the rising cost of living. The goal is to ensure that subsidies are targeted towards those who need them the most, particularly the lower-income groups.
Fiscal Deficit and Shift to Targeted Subsidies
The budget for 2024 is likely to contribute to the reduction of Malaysia’s fiscal deficit. CGS-CIMB analysts predict that the fiscal deficit will narrow to 4.3% of the gross domestic product (GDP) from an estimated 5% this year. Economy Minister Rafizi Ramli has stated that the government plans to shift to targeted subsidies in the 2024 budget. This shift is expected to save at least $1 billion to $2 billion annually. The government may also provide cash aid to further support those in need.
Transition to Goods & Services Tax (GST)
Malaysia currently has blanket subsidies for petrol, cooking oil, and rice. As part of its subsidy reforms, the government may reintroduce the Goods & Services Tax (GST) from late 2024 or early 2025. The GST was first introduced in 2015 but was replaced by the sales and service tax (SST) in 2018. Economists suggest that the transition to GST may occur at a lower rate of 4%. This move would broaden the revenue base and help improve the country’s financial situation.
In conclusion, Malaysia’s budget plan for 2024 aims to prioritize support for low-income households by cutting subsidies for the well-off and providing targeted cash aid. The government also plans to implement measures to alleviate the rising cost of living and reduce the fiscal deficit. The introduction of GST and the shift to targeted subsidies are among the key strategies to achieve these goals. These measures are essential to ensure fiscal resilience and support the country’s economic growth amidst global challenges.