KUALA LUMPUR: The government's plans to push ahead with tough reforms, including the gradual reduction of RON95 subsidies and the expansion of the sales and services tax (SST), will be positive for the economy.
In a commentary, BMI, a Fitch Solutions company, said the reforms would support the government's plan to narrow the fiscal deficit from 4.3 per cent of gross domestic product (GDP) in 2024 to 3.8 per cent in 2025.
Last year, Prime Minister Datuk Seri Anwar Ibrahim announced a targeted subsidy plan for RON95, under which the top 15 per cent (T15) of the super-rich and foreigners would pay the market price for fuel.
It has been reported that the T15 and foreigners consume 40 per cent of the fuel subsidy, equivalent to RM8 billion annually.
The savings from scaling back blanket subsidies will be allocated to initiatives and programmes for the public, similar to how savings from the diesel subsidy rationalisation were utilised.
Meanwhile, BMI said it expects Anwar to face challenges related to cost-of-living concerns, including the targeting of the RON95 subsidy.
It also noted that political challenges, including Tengku Datuk Seri Zafrul Abdul Aziz's potential switch from Umno to PKR, could slow the pace of reforms.
Previously, Zafrul, the investment, trade, and industry minister, confirmed that a discussion had been held with PKR concerning membership but said he had yet to decide on the matter.