Roll out targeted aid to ease impact of oil price surge, govt urged

 Economist Afzanizam Rashid says the government should re-introduce the same measures it had at the height of the Covid-19 pandemic.

Economist Afzanizam Rashid suggests that the government maintains the subsidies for fuel in the face of rising oil prices.

PETALING JAYA:

 The government should consider rolling out more targeted aid to cushion the rise in oil prices stemming from the US-led attack on Iran, an economist said.

Afzanizam Rashid said such aid could include initiatives similar to those introduced during the height of the Covid-19 pandemic.

“The government should be prepared to intervene, to find ways to ease the disruption,” the Bank Muamalat chief economist told FMT.

Afzanizam Rashid.

The Middle East crisis has already led to a surge in oil prices. The price of Brent crude shot past US$108 a barrel on Monday, up from this year’s low of US$58.80 on Jan 7, for an 83% increase in under 10 weeks.

Afzanizam expects the surge to continue in the near future, if the conflict does not end.

Iran had, on Thursday, warned that the price of oil could exceed US$200 per barrel.

Following almost two weeks of joint US-Israeli airstrikes on targets in Iran, and the Islamic republic’s response through attacks on several Gulf countries, US President Donald Trump vowed on Thursday to end the war “soon”.

Afzanizam noted that the government had, during the pandemic, extended wage subsidies to help companies retain their workforce, imposed moratorium on loans, and distributed cash aid.

He said the government should maintain the wage subsidies as well as look into providing soft loans to exporters to ease their financial burden.

He noted that under Budget 2026, the government has also undertaken to provide soft loans to assist companies that are affected by the US tariffs.

However, Afzanizam cautioned against introducing broad stimulus measures. Instead, he said, the focus should be on helping those who are most badly affected.

For instance, he said, the subsidy for RON95 and liquefied petroleum gas, as well as the targeted subsidy for diesel, should be maintained.

Afzanizam said the government must also publicise its plans on how to deal with rising oil prices. “This is to prevent panic (buying). The last thing we want is for the people to panic,” he said.

On Wednesday, Prime Minister Anwar Ibrahim announced that the subsidy for RON95 under the BUDI95 scheme will be maintained to keep its retail price at RM1.99 per litre. He said Malaysia has sufficient supply of petrol to enable the government to maintain that price until May.

Yeah Kim Leng.

Economist Yeah Kim Leng of Sunway University warned that if the price of crude oil stays at US$100 per barrel or even exceeds that, it will have a “huge inflationary impact”.

He said the cost-push inflation that will hit the global economy will cause a ripple effect that will eventually reach the country through the trade channel.

“The biggest risk is a global recession triggered by the oil price shock and global supply chain disruptions that could result in a slowdown in economic growth and higher inflation in our economy,” Yeah added. - FMT