Rise in Fuel Price: A Little Sacrifice For A Better Tomorrow

Little are being said about the Fitch Ratings which recorded a negative outlook for Malaysia in its latest report.  It is important to note that the ratings have a great impact on the perception of foreign investors whereby keeping a good rating is important in order to sustain the country’s competitiveness.

The negative report on Malaysia is technically a ‘side-effect’ from the global market trend which is greatly affected by the uncertainties and instability in the oil-producing countries.  

Apart from that, Fitch stated that Malaysia’s ‘lack of reform’ to tackle rising debt is stated as one of the factors that caused a negative outlook on the country’s sovereign credit rating.  The country’s widening fiscal deficit of RM14.9 billion plus high government debt of 53 percent of gross domestic product have also contributed to the fall in the ratings.  

Fitch believes that Malaysia would hardly achieve its interim three per cent deficit target for 2015 without consolidation measures.  The public finances have also worsened since the government’s weak showing in the May 2013 general elections.

Fitch has long emphasised two key budgetary vulnerabilities: reliance on petroleum-derived revenues and the high and rising weight of subsidies in expenditure.  It is estimated that petroleum-derived revenues contributed 33.7 per cent of federal revenues in 2012.

Should the government not take any drastic measure to tackle the effect, it may lead to outflow of foreign capital and result in higher borrowing costs for the country.  

Since the government has the responsibility to ensure the well-being of Malaysians in all walks of life, an unpopular decision to rationalize subsidies on fuel prices was announced earlier this evening.   The announcement was received with an immediate outcry - as expected.

But Malaysians must understand that the rationalization of fuel subsidies would help push a positive outlook on Malaysia, thus encourage foreign investment into the country. A good outlook is vital at a time when the world is seeing nothing but the fall of Islamic countries – one after another.

The allocation meant for subsidies could then be used for projects with long term benefits, particularly development, emphasising on rural areas including Sabah and Sarawak.

This would help boost Malaysia’s economy, as well as improving the quality of lives of the rural communities.  Apart from that, the government has also projected a higher BR1M amount for the low-incomes, to help them cope with the rising cost of living.

With that, the people would not be greatly affected while Malaysia picks-up speed in its quest to become a high-income nation very soon.