The Najib administration does not believe in “deficit means you go to hell and surplus means you go to heaven”, with a minister insisting today a plan to slash subsidies despite rising prices is well timed during a growing economy.
The government is to decide this week on stopping the subsidy bill from growing to RM21 billion, which could raise the prices of fuel, electricity and other goods, prompting dismay among people who complain their wages cannot keep up with inflation.
The cuts could also delay Prime Minister Datuk Seri Najib Razak’s decision to call a snap election.
“The government does not hold to the ideology that a deficit means you go to hell and surplus means you go to heaven,” Minister in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop (picture) told reporters here today.
He said the government was being pragmatic by spending during a financial crisis to restore confidence while cutting back when the economy has recovered.
The government has projected that a 20-year high 7 per cent deficit in 2009 will be reduced to 5.4 per cent this year but the ballooning subsidy bill could push it up to 6 per cent, according to research house AmResearch in a note yesterday.
Putrajaya has told the public to brace for subsidy cuts despite the consumer price index hitting a two-year high of 3 per cent in March, with non-alcoholic foodstuff surging by 4.7 per cent.
Malaysia’s economy rebounded last year with a 7.2 per cent growth after contracting by 1.7 per cent in 2009.
Nor Mohamed said “government funds are not unlimited” but unpopular subsidy cuts did not mean that the government will simply stop spending.
“There are many demands on the government budget but the government has been given the mandate to manage public funds,” he said.
Putrajaya will review subsidies by the end of the month ahead of an expected hike in fuel prices including the base level RON95 petrol.
It has said that it currently subsidises 90 sen per litre of RON95 to keep the pump price at RM1.90 per litre.
