Prime Minister Najib Abdul Razak said Monday the government will raise petrol and diesel prices by up to 11 percent beginning Tuesday and delay some public infrastructure projects, as the government aims to cut the deficit and bolster its finances.
As part of the government's "subsidy rationalization" program, the price of RON 95 petrol will be increased from 1.90 ringgit to 2.10 ringgit per liter, and diesel from 1.80 ringgit to 2.00 ringgit, Najib told a press conference after chairing the Fiscal Policy Committee.
Without the subsidy cuts, Najib said the total fuel allocation for 2013 will reach up to 24.8 billion ringgit as the government is paying 83 sen for every liter of RON 95 petrol and 1.00 ringgit for 1 liter of diesel.
By reducing 20 sen from the fuel subsidy, the government will save 3.3 billion ringgit a year. For the next four months, it will save the government 1.1 billion ringgit, Najib said.
The government last raised fuel prices by 5 sen per liter in December 2010.
Najib said he did not believe the increase in fuel prices will be "burdensome" to the public.
To soften the blow of the price hike, Najib said the government will increase the current one-off 500 ringgit allowance to low-income groups. The amount will be announced when he presents the 2014 budget to Parliament on Oct. 25.
He said he would also announce the government's proposal for a goods and services tax in the 2014 budget speech.
Subsidy cuts and the goods and services tax were part of the government fiscal reform measures that have been long delayed over fear of a backlash during the May general election.
The opposition is against the goods and services tax and subsidy cuts, saying the measure would increase the burden on the people.
The opposition blames government inefficiency and corruption for the current state of the economy.
The central bank last month cut the growth forecast for this year to between 4.5 and 5.0 percent.
Najib said the government will also put off projects with "high import components" in a bid to improve the nation's international balance-of-payments situation.
The government hopes to achieve its fiscal deficit target of about 3 percent of gross domestic product by 2015 and a balanced budget by 2020, he said.
This year's fiscal deficit is expected to be within 4 percent of the GDP. The deficit stood at 4.5 percent last year.