KUALA LUMPUR: The targeted diesel subsidy that took effect in Peninsular Malaysia on Monday was implemented at the right time, Bank Negara Malaysia governor Datuk Abdul Rasheed Abdul Ghaffour said.
The move was supported by strong economic growth and declining inflation rates, ensuring no arbitrary price hikes, he added.
In an exclusive interview with TV3's Buletin Utama tonight, Abdul Rasheed said he is confident that domestic spending, which drives the country's economy, will remain strong despite the new subsidy policy.
He said stable growth, controlled inflation and low unemployment rates ensure that targeted fuel subsidies can be implemented without harming the national economy.
"With economic growth at 4 to 5 per cent and declining inflation rates, we have a good opportunity to implement structural reforms now," he added.
Malaysia recorded first-quarter growth of 4.2 per cent, indicating the country's economy is on track to meet this year's positive projections.
The introduction of Budi Madani and fleet cards for eligible diesel subsidy recipients aims to keep the inflation rate between 2 per cent and 3.5 per cent.
Bank Negara sees no signs of an inflation spike during this period.
"The estimated inflation rate of 2 to 3.5 per cent has already factored in the subsidy, which is why we see a broader range," Abdul Rasheed explained.
"This includes elements from the targeted diesel subsidy."
He also said that structural economic reforms, including subsidy reforms, are crucial for sustainable economic growth.
The government previously revealed that bulk subsidies for fuel and other goods soared to over RM80 billion last year.
Therefore, reforms are needed to prevent leakage and smuggling and to target subsidies only to those in need.