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Understanding Malaysia's Subsidy Cuts: Impact on T20 Households

Updated: Jun 13, 2023

T20s are being cut off from government subsidies and this has sparked a debate among the rakyat. Some are saying its unfair while others are saying that it’s about damn time!

Malaysia Prime Minister Anwar Ibrahim announcing electric and fuel targeted subsidy cut

The Subsidy Cuts


Towards the end of May, Prime Minister Datuk Seri Anwar Ibrahim said those in the Top 20 (T20) income group will no longer enjoy any subsidies for electricity. The T20 in question are those with a total household income of more than RM 10,960 a month.


Around the same time, deputy finance minister Ahmad Maslan also announced that this same group will no longer reap the benefits of government fuel subsidies on RON95 petrol and diesel starting next year through targeted subsidies.


The goal of these subsidy cuts was to curb leakages and ultimately cut down on subsidy allocation in the country’s yearly budget. This is in hopes of reallocating future revenue to much-needed investments like in our education system, healthcare or helping the hard-core poor.


For your information, RM64 billion has been carved out of Budget 2023 solely for the purpose of subsidies, initiatives and financial aid.


Mixed Reactions


The public response to the subsidy cuts has been mixed, to say the least.


Proponents argue that with the cuts, it’ll help narrow the wealth gap and prioritise the B40 as well as hard-core poor communities. Their reason is that this will ensure future economic growth and help people escape the poverty cycle.


On the other hand, critics argue that it’s unfair to the T20 households who contribute significantly to personal income tax revenues, and will no longer receive any benefits from it. There are also concerns that the categorization of T20 should be redefined to only include individual income rather than household income, particularly for urban areas where the cost of living is considerably higher.


Well, this debate will continue to happen, even in the grand halls of the Dewan Rakyat until more information on the subsidy cuts and targeted subsidies is revealed.


Redirecting Subsidy Revenues


However, on that note, one crucial aspect of the subsidy cuts that the general public can agree on is understanding where the redirected subsidy revenues will be allocated.


It’s expected of the government to invest these savings into areas that benefit the nation as a whole. Enhancing the education system, such as through teacher training, school infrastructure development, and technology integration, should be a priority. Additionally, allocating more funds to the healthcare sector can boost employment opportunities, facilitate research and development, and ultimately improve the accessibility and quality of healthcare services.


And according to deputy finance minister Ahmad Maslan, that is what they’re planning to do.


Conclusion


The subsidy cuts are part of a broader trend that aims to implement targeted subsidies efficiently in Malaysia. By reducing subsidy expenditure, the government can redirect these funds to sectors that require urgent attention, such as education and healthcare.


While further announcements are awaited, remaining engaged with developments surrounding these subsidy cuts is essential for us all.


Here at Mr Money TV, we’ve talked about this topic several times through our podcast and also YouTube video. We discussed how these subsidy cuts will affect the rakyat at all income levels and what it means for the outlook of our beloved country. Do tune in with a pinch of salt!


So, what do you think about the subsidy cuts? Do you think it’s fair to the T20s?


Disclaimer: This article provides an analysis of the recent subsidy cuts in Malaysia and expresses diverse opinions. The views and opinions presented here are not definitive and may be subject to change as new information becomes available.




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