RON 95 reform should move forward, say experts

The Star

27-04-2025

PETALING JAYA: Despite concerns over slower global economic growth and impending US tariffs, economists say the government should proceed cautiously with the planned rollout of the RON95 targeted subsidy scheme.
Sunway University economics professor Dr Yeah Kim Leng said the current slump in global oil prices offers a more favourable window for the implementation, but urged caution given broader uncertainties.
'Rolling out the RON95 targeted subsidy scheme while global oil prices are falling would be less burdensome and more palatable compared to implementing it during a price spike,' he said.
However, Yeah warned that the government must also weigh the risks of a global downturn, the unpredictability of US President Donald Trump's policies, and the uncertain impact of US tariffs.
Given these risks, he suggested that a temporary pause might be appropriate until there is greater clarity on the tariff situation and its potential economic effects.
'A brief delay will not only strengthen the government's fiscal position but more importantly, put the country in a better position to withstand future oil price shocks,' he said, adding that the risks of uncertainty currently outweigh the cost of a slight postponement.
'Should a delay occur, immediate execution must follow once conditions stabilise. As things stand, a June rollout could still proceed as planned.'
Oil prices have fluctuated sharply, dropping below US$60 (RM262) per barrel in early April before climbing to around US$65 (RM285) mid-month – still lower than US$74 (RM324) in December 2024.
According to the International Energy Agency, current benchmark crude oil prices are at their lowest levels in four years.
In light of this, some quarters have urged the government to delay the subsidy rationalisation.
Economist Dr Geoffrey Williams disagrees, saying any delay would undermine structural reforms in Malaysia's fiscal policy.
'If subsidy rationalisation involves raising pump prices, perhaps in line with market rates, then now is the best time to push ahead,' he said.
Williams warned that delaying the move would send the wrong message about the government's commitment to reform.
'There is no need to delay. It would be a huge disappointment and a sign of policy failure,' he said, adding that Malaysia is well-positioned in its tariff negotiations with the United States.
Similarly, Emir Research founder Dr Rais Hussin said there is no compelling reason to delay the RON95 rationalisation but acknowledged that agility is needed in its implementation.
'Falling global oil prices and a stronger ringgit should ease the fiscal burden, allowing the government to roll out targeted subsidies with minimal shock to consumers,' he said.
Asked if a wait-and-see approach was appropriate, Rais said scenario planning is wise but ruled out a blanket postponement.
'A complete delay would send the wrong signal about policy commitment. Malaysia has already delayed targeted fuel subsidies for years. Clear communication is needed now to assure the public that targeting does not mean burdening the vulnerable,' he said.
Instead, Rais proposed that the government prepare contingency measures, such as scaling up direct cash aid or adjusting eligibility criteria, if global economic conditions worsen after July.
'A wait-and-see approach should apply to adjusting the mechanism – not abandoning the principle,' he said.