Govt subsidies to shoot up from RM4bil to RM30bil this year, says Finance Ministry

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KUALA LUMPUR (Reuters): Malaysia said on Friday (June 3) an increase in government revenue from rising commodity prices was insufficient to offset an expected spike in subsidy spending this year.

Current geopolitical tensions had elevated fiscal risks, particularly from rising commodity prices, global supply chain disruptions and tightening monetary policy, the Finance Ministry said, as the country looks to prepare its 2023 Budget.

The government expects subsidies on goods, particularly petroleum and cooking oil, to increase to RM30bil, compared to RM4bil estimated in this year's budget. Going forward, the shortfall was expected to be cushioned by additional tax measures, as well as a more targeted approach to minimise leakages and ensure subsidies reach vulnerable groups, the ministry said.

The government would continue to intervene where necessary to mitigate sharp rises in the price of essential goods, and ensure food prices remained reasonable, it added. Malaysia's central bank expects headline inflation to average between 2.2% and 3.2% this year, with food costs up 4.1% in April. Last month, the central bank unexpectedly raised its key interest rate to cool inflationary pressures.- Reuters

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