'Fuel subsidy removal could lead to drop in savings, purchasing power for M40'

SHAH ALAM - The middle income group (M40) may be forced to change their planned financial expenditures if a portion of them were to have fuel subsidies removed, says University Sains Islam Malaysia (USIM) Economics and Muamalat Faculty, Banking and Islamic finance lecturer Dr Mohd Faisol Ibrahim.

"Other than a reduction in savings, the group would face a drop in purchasing power.

"They would have to place additional allocation to fuel, causing monthly savings to reduce.

"Some of them would have to perform part-time work to gain additional income.

"However, the worrying matter is if they do not manage their finances well after the hike in fuel costs, causing them to be involved in long loan schemes," he told Sinar yesterday.

Kenanga Research previously estimated that a portion of M40s would not receive the subsidised fuel after the introduction of targeted subsidies.

The research firm said the targeted fuel subsidies would be tabled in Budget 2024 in Parliament on Oct 13 and was expected to come into effect from Jan 1, 2024.

Mohd Faisol said the government must pay attention to such issues as a portion of the M40 who would not receive the subsidy may work further from home.

"The situation would cause them to feel more pressure at work, especially those that require them to be mobile from one location to another," he said.

He urged the government to create a mechanism for fuel subsidies to be given to those qualified.

Mohd Faisol said 35 per cent of RM77.3 billion used in 2020 for fuel subsidies were benefited by the higher income group (T20).

"The government should create an indicator that could prevent and deter this group (T20) from using subsidised fuel," he said.